Social norm, the informal sector and unemployment

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working paper ; No. 4-2002

Classification and Topics

• Classification: Wirtschaft ; Tax Evasion and Avoidance ; Unemployment: Models, Duration, Incidence, and Job Search
• Subject: Tax evasion ; informal sector ; matching ; bargaining ; unemployment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kolm, Ann-Sofie ; Larsen, Birthe
• Event: Veröffentlichung
• (who): Copenhagen Business School (CBS), Department of Economics
• (where): Frederiksberg
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/208453
• Last update: 10.03.2025, 11:45 AM CET