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Unreported Labour

  • Barth, Erling

    ()

    (Institute for Social Research, Oslo)

  • Ognedal, Tone

    ()

    (University of Oslo)

Unreported labour by one worker in a firm increases the probability of detection for his fellow workers, not only for himself. The firm takes this external effect into account. As a consequence, unreported work becomes rationed by the firms demand, rather than determined by demand equal supply. The gap between supply and demand increases with firm size. An empirical analysis on survey data supports theses theoretical predictions. Using a bivariate probit model, we find evidence of excess supply of unreported work in firms. We also find that the gap between supply and demand increases with firm size.

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File URL: http://ftp.iza.org/dp1893.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1893.

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Length: 34 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1893
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  1. Lacroix, Guy & Fortin, Bernard, 1992. "Utility-Based Estimation of Labour Supply Functions in the Regular and Irregular Sectors," Economic Journal, Royal Economic Society, vol. 102(415), pages 1407-22, November.
  2. Jørgensen, Øystein & Ognedal, Tone & Strøm, Steinar, 2005. "Labor supply when tax evasion is an option," Memorandum 06/2005, Oslo University, Department of Economics.
  3. E. Paul Durrenberger, 2005. "Labour," Chapters, in: A Handbook of Economic Anthropology, chapter 8 Edward Elgar.
  4. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers 9610, Wisconsin Madison - Social Systems.
  5. Reinganum, Jennifer F. & Wilde, Louis L., 1985. "Income tax compliance in a principal-agent framework," Journal of Public Economics, Elsevier, vol. 26(1), pages 1-18, February.
  6. Lemieux, Thomas & Fortin, Bernard & Frechette, Pierre, 1994. "The Effect of Taxes on Labor Supply in the Underground Economy," American Economic Review, American Economic Association, vol. 84(1), pages 231-54, March.
  7. Reinganum, Jennifer F & Wilde, Louis L, 1986. "Equilibrium Verification and Reporting Policies in a Model of Tax Compliance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(3), pages 739-60, October.
  8. 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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