Under-reporting of Income and Labor Market Performance

Ann-Sofie Kolm () and Søren Bo Nielsen

Journal of Public Economic Theory, 2008, vol. 10, issue 2, pages 195-217

Abstract: To examine the effects on labor market performance of government tax and enforcement policies, this paper develops an equilibrium model featuring tax evasion, matching frictions, and worker-firm wage bargains. In the wage bargains, workers and firms can agree on the amount of remuneration that should not be reported to the tax authorities. We find that increased taxation actually reduces unemployment, whereas more zealous enforcement has the opposite effect. Copyright 2008 Blackwell Publishing, Inc..

Date: 2008

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Working Paper: Under-reporting of Income and Labor Market Performance (2005)
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