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Optimal taxation and monitoring in an economy with matching frictions and underground activities

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  • Lisi, Gaetano

Abstract

This short paper shows the interdependence of taxation and monitoring policy in a search and matching model of equilibrium unemployment with an underground sector. More precisely, from a social welfare standpoint, two options are available to the policy maker: s/he may either substitute a tighter monitoring with a higher penalty or enforce both a higher taxation and an increased monitoring.

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File URL: http://mpra.ub.uni-muenchen.de/27701/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27701.

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Date of creation: 27 Nov 2010
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Handle: RePEc:pra:mprapa:27701

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Keywords: optimal taxation; tax evasion; underground economy; job search theory;

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  1. James Albrecht & Lucas Navarro & Susan Vroman, 2009. "The Effects of Labour Market Policies in an Economy with an Informal Sector," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 119(539), pages 1105-1129, 07.
  2. Hagedorn, Marcus & Manovskii, Iourii, 2008. "The cyclical behavior of equilibrium unemployment and vacancies revisited," Working Paper Series, European Central Bank 0853, European Central Bank.
  3. Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2409, C.E.P.R. Discussion Papers.
  4. Kolm, Anne-Sofie & Larsen, Birthe, 2003. "Wages, unemployment, and the underground economy," Working Papers, Copenhagen Business School, Department of Economics 11-2003, Copenhagen Business School, Department of Economics.
  5. Tito Boeri & Pietro Garibaldi, 2005. "Shadow Sorting," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER International Seminar on Macroeconomics 2005, pages 125-163 National Bureau of Economic Research, Inc.
  6. Ann-Sofie Kolm & S�Ren Bo Nielsen, 2008. "Under-reporting of Income and Labor Market Performance," Journal of Public Economic Theory, Association for Public Economic Theory, Association for Public Economic Theory, vol. 10(2), pages 195-217, 04.
  7. Boeri, Tito & Garibaldi, Pietro, 2002. "Shadow Activity and Unemployment in a Depressed Labour Market," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3433, C.E.P.R. Discussion Papers.
  8. Klarita G�rxhani, 2004. "The Informal Sector in Developed and Less Developed Countries: A Literature Survey," Public Choice, Springer, Springer, vol. 120(3_4), pages 267-300, 09.
  9. Maxim Bouev, 2002. "Official Regulations and the Shadow Economy: A Labour Market Approach," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 524, William Davidson Institute at the University of Michigan.
  10. Simon Burgess & Helene Turon, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies – A Comment," Bristol Economics Discussion Papers 05/573, Department of Economics, University of Bristol, UK.
  11. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 25-49, March.
  12. Jacques, Jean-François & Fugazza, Marco, 2004. "Labor market institutions, taxation and the underground economy," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/1888, Paris Dauphine University.
  13. Gaetano Lisi, 2010. "The Strange Case of Dr. “Unemployed” and Mr “Hidden” in Italy," Economics Bulletin, AccessEcon, vol. 30(4), pages 2802-2816.
  14. Maxim Bouev, 2005. "State Regulations, Job Search and Wage Bargaining: A Study in the Economics of the Informal Sector," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan wp764, William Davidson Institute at the University of Michigan.
  15. Lisi, Gaetano, 2011. "Matching Models of Equilibrium Unemployment: An Overview," MPRA Paper 30191, University Library of Munich, Germany.
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