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Subsidising consumer services: effects on employment, welfare and the informal economy


  • Niels Fredriksen
  • Peter Hansen
  • Henrik Jacobsen
  • Peter Sørensen


It is widely agreed that the opportunities for expansion of aggregate employment in the OECD area must be sought mainly in the private service sector. Thus,because of budgetary problems and voter resistance to higher tax rates, the scope for further expansion of public sector employment seems limited in most OECD countries. Furthermore, the primary sector will undoubtedly continue to release labour resources and, with normal growth rates, there is little prospect of a secular rise in manufacturing employment, since the increase in demand for manufactures is likely to be met through increases in labour productivity. In particular, the ongoing shifts in the international division of labour and the associated transition to the ‘knowledge-based economy’ within the OECD are likely to destroy a large number of manufacturing jobs for unskilled and lowskilled workers in the OECD area.

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  • Niels Fredriksen & Peter Hansen & Henrik Jacobsen & Peter Sørensen, 1995. "Subsidising consumer services: effects on employment, welfare and the informal economy," Fiscal Studies, Institute for Fiscal Studies, vol. 16(2), pages 71-93, May.
  • Handle: RePEc:ifs:fistud:v:16:y:1995:i:2:p:71-93

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    References listed on IDEAS

    1. Graafland, J J, 1990. "Tax Policies and Interaction between Hidden and Official Economy," Public Finance = Finances publiques, , vol. 45(1), pages 75-89.
    2. Boskin, Michael J., 1975. "Efficiency aspects of the differential tax treatment of market and household economic activity," Journal of Public Economics, Elsevier, vol. 4(1), pages 1-25, February.
    3. Cowell, Frank A., 1985. "Tax evasion with labour income," Journal of Public Economics, Elsevier, vol. 26(1), pages 19-34, February.
    4. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
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    Cited by:

    1. Engström, Per & Holmlund, Bertil & Kolm, Ann-Sofie, 2001. "Optimal Taxation in Search Equilibrium with Home Production," Working Paper Series 2001:19, Uppsala University, Department of Economics.
    2. Bertil Holmlund, 2002. "Labor Taxation in Search Equilibrium with Home Production," German Economic Review, Verein für Socialpolitik, vol. 3(4), pages 415-430, November.
    3. Strand, Jon, 2005. "Tax distortions, household production, and black-market work," European Journal of Political Economy, Elsevier, vol. 21(4), pages 851-871, December.
    4. Kleven, Henrik Jacobsen & Richter, Wolfram F & Sorensen, Peter Birch, 2000. "Optimal Taxation with Household Production," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 584-594, July.
    5. Jan Boone & Peter Fredriksson & Bertil Holmlund & Jan C. van Ours, 2007. "Optimal Unemployment Insurance with Monitoring and Sanctions," Economic Journal, Royal Economic Society, vol. 117(518), pages 399-421, March.
    6. Pietro Garibaldi & Etienne Wasmer, 2005. "Equilibrium Search Unemployment, Endogenous Participation, And Labor Market Flows," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 851-882, June.
    7. Dan Anderberg & Alessandro Balestrino, 2000. "Household Production and the Design of the Tax Structure," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(4), pages 563-584, August.

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