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Underground activities and labour market performance
Stockholm University, Faculty of Social Sciences, Department of Economics.
Number of Authors: 22019 (English)In: International Tax and Public Finance, ISSN 0927-5940, E-ISSN 1573-6970, Vol. 26, no 1, p. 41-70Article in journal (Refereed) Published
Abstract [en]

We build a general equilibrium search and matching model with an informal sector. We consider the impact of traditional policy instruments discussed in the tax evasion literature, such as changes in the tax and punishment system and the employment protection legislation, as well as the impact of concealment costs, on labour market outcomes. The model is calibrated to and simulated on the northern and southern European countries, where countries in the south have significantly higher informal sectors than countries in the north. We conclude that differences in tax and punishment systems cannot explain the observed difference. Instead, we find that stricter employment protection legislation in southern Europe, as well as the higher tax morale and more extensive use of third-party reporting in northern Europe, are potential candidates for explaining the difference.

Place, publisher, year, edition, pages
2019. Vol. 26, no 1, p. 41-70
Keywords [en]
Informal sector, Search and matching, Unemployment, Concealment costs, Employment protection legislation, Tax evasion
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:su:diva-166568DOI: 10.1007/s10797-018-9505-4ISI: 000458294200003OAI: oai:DiVA.org:su-166568DiVA, id: diva2:1293261
Available from: 2019-03-04 Created: 2019-03-04 Last updated: 2019-03-04Bibliographically approved

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Kolm, Ann-Sofie
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