Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208453
Authors: 
Kolm, Ann-Sofie
Larsen, Birthe
Year of Publication: 
2002
Series/Report no.: 
Working paper 4-2002
Abstract: 
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 on the labour market and a social norm. Conducting informal work, or employing a worker infor- mally, is associated with expected punishment fees and payments of a moral cost, given that there is a social norm against tax evasion. This framework facilitates an analysis of how wage setting, unemployment and the size of the informal sector are affected by punishment policies, which has been ignored in the previous literature. Furthermore, the inclusion of an endogenously determined norm against tax evasion may explain differences in-between regions or countries in relative sizes of the formal and the informal sectors for similar tax- and punishment policies.
Subjects: 
Tax evasion
informal sector
matching
bargaining
unemployment
JEL: 
H26
J64
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/3.0/
Document Type: 
Working Paper

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