Informal work networks

Marcelo Arbex and Dennis O'Dea

Canadian Journal of Economics, 2011, vol. 44, issue 1, 247-272

Abstract: We present a model of time allocation between formal and informal labour supply, where workers learn of informal job opportunities from their peers. In addition to formal income taxation and enforcement, individuals' labour supply decisions depend on the number of their peers with informal jobs and the strength of social ties. Workers allocate more time to informal activities when tax enforcement is lax and job information transmission is good. More connected social networks (e.g., wheel, complete) feature lower average income but higher average utility than poorly connected social networks (e.g., star, empty). Average income may be non-monotonic in tax enforcement.

JEL-codes: D85 E26 J22 J64 (search for similar items in EconPapers)
Date: 2011
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