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The Black Economy and Education

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Abstract

This paper develops and equilibrium search and matching model with informal sector employment opportunities and educational choice. We show that informal sector job opportunities distort educational attainment inducing a too low stock of educated workers. As informal job opportunities to a larger extent face low skilled workers, combating the informal sector improves welfare as it increases the incentives for education. However, too aggressive combating of the informal sector is not optimal as that induces inefficiently high unemployment rates.

Suggested Citation

  • Kolml, Ann-Sofie & Larsen, Birthe, 2010. "The Black Economy and Education," Research Papers in Economics 2010:3, Stockholm University, Department of Economics.
    • Handle: RePEc:hhs:sunrpe:2010_0003
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    5. Ann-Sofie Kolm & Birthe Larsen, 2002. "Social Norm, the Informal Sector, and Unemployment," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(3), pages 407-407, August.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Black Economy and Education
      by Ariel Goldring in Free Market Mojo on 2010-02-17 16:01:30

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    Cited by:

    1. Gaetano Lisi & Maurizio Pugno, 2011. "Tax Morale, Entrepreneurship, and the Irregular Economy," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 5(2), pages 116-131, August.
    2. Laszlo Goerke, 2013. "Human Capital Formation And Tax Evasion," Bulletin of Economic Research, Wiley Blackwell, vol. 65(1), pages 91-105, January.
    3. Gaetano Lisi, 2010. "The Strange Case of Dr. “Unemployed” and Mr “Hidden” in Italy," Economics Bulletin, AccessEcon, vol. 30(4), pages 2802-2816.
    4. Lisi, G., 2011. "Entrepreneurship, On-the-job Search and Informal Jobs," Journal of the New Economic Association, New Economic Association, issue 9, pages 33-46.
    5. Gaetano Lisi & Maurizio Pugno, 2015. "A matching model of endogenous growth and underground firms," International Journal of Economic Theory, The International Society for Economic Theory, vol. 11(4), pages 347-369, December.
    6. Gaetano Lisi & Maurizio Pugno, 2010. "The Underground Economy in a Matching Model of Endogenous Growth," Working Papers 2010-07, Universita' di Cassino, Dipartimento di Economia e Giurisprudenza.

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    More about this item

    Keywords

    Tax evasion; underground economy; 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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