Insiders, Outsiders, and the Underground Economy
This paper considers whether labour market rigidities lead to more underground economic activities. This is suggested by aggregate cross-country data which show that underground economic activities are more strongly correlated with a commonly used index of employment protection than with effective tax rates. A simple theoretical model is constructed to support this finding. The model, contrary to many models of equilibrium unemployment in the literature, also has the feature that a rise in a proportional tax affects employment (in addition to underground economic activities).
|Date of creation:||2003|
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- Gilles Saint-Paul, 2002.
"The Political Economy of Employment Protection,"
Journal of Political Economy,
University of Chicago Press, vol. 110(3), pages 672-701, June.
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- Saint-Paul, Gilles, 1999. "The Political Economy of Employment Protection," CEPR Discussion Papers 2109, C.E.P.R. Discussion Papers.
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- Holmlund, B., 2000. "Labor Taxation in Search Equilibrium with Home Production," Papers 2000:1, Uppsala - Working Paper Series.
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- Friedrich Schneider, 2000. "The Increase of the Size of the Shadow Economy of 18 OECD Countries: Some Preliminary Explanations," CESifo Working Paper Series 306, CESifo Group Munich.
- Friedrich Schneider, 2000. "The Increase of the size of the shadow economy of 18 OECD countries: Some preliminary explanations," Economics working papers 2000-08, Department of Economics, Johannes Kepler University Linz, Austria.
- Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, 04.
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- Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
- Dan Anderberg & Alessandro Balestrino & Umberto Galmarini, 2003. "Search and Taxation in a Model of Underground Economic Activities," Economic Inquiry, Western Economic Association International, vol. 41(4), pages 647-659, October.
- James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June.
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- Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
- Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
- Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-816, May. Full references (including those not matched with items on IDEAS)
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