Resource title

Underground Activities and Labour Market Performance

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Resource description

This paper develops a general equilibrium search and matchingmodel where an underground economy co-exists along with the formalpart of the economy. In analyzing how tax and punishment policiesa¤ect labour market performance, we nd that punishment of infor-mal sector activities induce workers and rms to reallocate towardsthe formal sector. However, more importantly, we nd that this real-location tends to improve e¢ ciency in search, reduce the overall wagepressure, and reduce actual unemployment.

Resource author

Ann-Sofie Kolm, Birthe Larsen

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Resource publish date

Resource language

eng

Resource content type

application/pdf

Resource resource URL

http://hdl.handle.net/10398/8209

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