Does Tax Evation Affect Unemployment and Educational Choice?

Ann-Sofie Kolm () and Birthe Larsen ()
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Birthe Larsen: Copenhagen Business School, Postal: Department of Eonomics, Solbjerg Plads 3, DK-2000 Copenhagen F, Denmark

No 2003:22, Working Paper Series from Uppsala University, Department of Economics

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.

Keywords: Tax evasion; underground economy; education; matching; unemployment (search for similar items in EconPapers)
JEL-codes: H26 I21 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-edu and nep-pbe
Date: 2003-09-01
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http://www.nek.uu.se/pdf/wp2003_22rv.pdf Revised version (application/pdf)
http://www.nek.uu.se/pdf/wp2003_22.pdf Old version (application/pdf)

Related works:
Working Paper: Does tax evasion affect unemployment and educational choice? (2004)
Working Paper: Does Tax Evasion Affect Unemployment and Educational Choice? (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:hhs:uunewp:2003_022

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