Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82719
Authors: 
Kolm, Ann-Sofie
Larsen, Birthe
Year of Publication: 
2003
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 2003:22
Abstract: 
While examining the macroeconomic effects of government tax and punishment policies, this paper develops a three-sector general equilibrium model featuring matching frictions and worker-firm wage bargaining. Workers are assumed to differ in ability, and the choice of education is determined endogenously. Job opportunities in an informal sector are available only to workers who choose not to acquire higher education. We find that increased punishment of informal activities increases the number of educated workers and reduces the number of unemployed workers. The analysis also shows that knowledge spillovers give a welfare maximizing government an extra incentive to punish informal activities.
Subjects: 
Tax evasion
underground economy
education
matching
unemployment
JEL: 
H26
I21
J64
Document Type: 
Working Paper

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