Informal Unemployment and Education

Birthe Larsen

No 02-2011, Working Papers from Copenhagen Business School, Department of Economics

Abstract: This paper develops a four sector equilibrium search and matching model with informal sector employment opportunities and educational choice. We show that underground activities reduce educational at- tainments if informal employment opportunities mainly are available to low educated workers. More zealous enforcement policy will in this case improve educational incentives as it reduces the attractiveness of remaining a low educated worker. Characterizing the optimal enforce- ment policies, we nd that relatively more audits should be targeted towards the sector employing low educated workers, elsewise a too low stock of educated workers is materialized.

Keywords: labor market; education (search for similar items in EconPapers)
JEL-codes: J08 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2011-12-31
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