Skip to main content

Optimal Policies and the Informal Sector

Resource type
Date created
2012
Authors/Contributors
Abstract
This paper characterizes optimal policies in the presence of tax evasion and undocumented workers. In equilibrium, domestic workers may work exclusively in the formal sector or also in the informal sector. Surprisingly, in equilibrium, wages are always equalized between domestic and undocumented workers, even if they do not work in the same sectors of the economy. This is driven by the interaction of firm level decisions with optimal government policy. We also find that enforcement may not always be decreasing in its cost, and that governments will optimally enforce labour market segmentation if enforcement costs are not too high.
Document
Published as
Cuff, K., N. Marceau, S. Mongrain and J. Roberts (2012), "Optimal Policies and the Informal Sector," Journal of Public Economics, 95, 1280-1291.
Publication title
Journal of Public Economics
Document title
Optimal Policies and the Informal Sector
Date
2012
Volume
95
First page
1280
Last page
1291
Copyright statement
Copyright is held by the author(s).
Scholarly level
Peer reviewed?
Yes
Language
English
Member of collection
Download file Size
pubec3050.pdf 256.51 KB

Views & downloads - as of June 2023

Views: 0
Downloads: 0