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Moral Costs, The Informal Sector And Unemployment

  • Kolm, Ann-Sofie

    (Uppsala University)

  • Larsen, Birthe

    (Department of Economics, Copenhagen Business School)

While examining the macroeconomic effects of increased government control of the informal sector, this paper develops a two-sector general equilibrium model featuring matching frictions and worker-firm wage bargaining. The same good is produced in the formal and in the informal sector. Moral considerations are determinant for whether the worker search for jobs in the formal or in the informal sector. We analyse the impact of higher punishment fees and a higher audit rate on wages, sector division, unemployment and welfare.

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File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7525
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Paper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 01-2001.

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Length: 18 pages
Date of creation: 22 Jan 2001
Date of revision:
Handle: RePEc:hhs:cbsnow:2001_001
Contact details of provider: Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Phone: 38 15 25 75
Fax: 38 15 34 99
Web page: http://www.cbs.dk/departments/econ/
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