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Informal unemployment and education

Author

Listed:
  • Ann-Sofie Kolm

    (Stockholm University)

  • Birthe Larsen

    (Copenhagen Business School)

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 attainments if informal employment opportunities mainly are available for low-educated workers. A more zealous enforcement policy will in this case improve educational incentives as it reduces the attractiveness of remaining a low-educated worker. However, unemployment also increases. Characterizing the optimal enforcement policies, we find that relatively more audits should be targeted towards the sector employing low-educated workers; elsewise, a too low stock of educated workers is materialized.

Suggested Citation

  • Ann-Sofie Kolm & Birthe Larsen, 2016. "Informal unemployment and education," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-36, December.
    • Handle: RePEc:spr:izalbr:v:5:y:2016:i:1:d:10.1186_s40172-016-0048-6
    DOI: 10.1186/s40172-016-0048-6
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    References listed on IDEAS

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    9. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-849, November.
    10. Henrik Jacobsen Kleven & Martin B. Knudsen & Claus Thustrup Kreiner & Søren Pedersen & Emmanuel Saez, 2011. "Unwilling or Unable to Cheat? Evidence From a Tax Audit Experiment in Denmark," Econometrica, Econometric Society, vol. 79(3), pages 651-692, May.
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    Cited by:

    1. Gaetano Lisi, 2024. "Shadow economy, “mixed” firms, and labour market outcomes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 685-701, June.
    2. Colin C. Williams, 2023. "A Modern Guide to the Informal Economy," Books, Edward Elgar Publishing, number 18668.
    3. Chiara Canta & Helmuth Cremer & Firouz Gahvari, 2024. "Welfare‐improving tax evasion," Scandinavian Journal of Economics, Wiley Blackwell, vol. 126(1), pages 98-126, January.
    4. Bago, Jean-Louis & Souratié, Wamadini M. & Ouédraogo, Ernest & Zahonogo, Pam, 2022. "Human Capital and Women’s Informal Work: Theory and Evidence," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 47(3), pages 1-28, September.
    5. Ann-Sofie Kolm & Birthe Larsen, 2019. "Underground activities and labour market performance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(1), pages 41-70, February.
    6. Temitope Sade AKINTUNDE & Abiodun Samuel ISAYOMI, 2023. "The Effect Of Informal Economy On Human Capital Development," Business & Management Compass, University of Economics Varna, issue 3, pages 182-195.
    7. Azunre, Gideon Abagna & Amponsah, Owusu & Takyi, Stephen Appiah & Mensah, Henry & Braimah, Imoro, 2022. "Urban informalities in sub-Saharan Africa (SSA): A solution for or barrier against sustainable city development," World Development, Elsevier, vol. 152(C).
    8. Ligita Gasparėnienė & Rita Remeikienė & Colin C. Williams, 2022. "Unemployment and the Informal Economy," SpringerBriefs in Economics, Springer, number 978-3-030-96687-4, April.
    9. Gökçer Özgür & Ceyhun Elgin & Adem Y. Elveren, 2021. "Is informality a barrier to sustainable development?," Sustainable Development, John Wiley & Sons, Ltd., vol. 29(1), pages 45-65, January.
    10. Ligita Gasparėnienė & Rita Remeikienė & Colin C. Williams, 2022. "Theorizing the Informal Economy," SpringerBriefs in Economics, in: Unemployment and the Informal Economy, chapter 0, pages 7-60, Springer.

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    More about this item

    Keywords

    Tax evasion; The informal sector; Education; Matching; Unemployment;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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