We study the effects of underground activities on labour market dynamics in a RBC model with search frictions in the labor market, bargained wage and quadratic hiring costs. Underground activities, which allow agents to (partially) evade taxes, are modelled through a moonlighting production scheme where both regular and underground labor use the same capital equipment inside the firm. Calibrating the model on the U.S. economy, we show that a higher relative size of underground production implies lower average employment and a lower job finding rate, together with higher volatility of employment and lower volatilities of hours worked and wages of regular labor services. The theoretical explanation we provide is that a higher level of the underground activity increases the ratio of the flow contribution of non-working to the flow contribution of a worker to a labour match.
G., C., Giuli, F., & E., M. (2012). Underground labor, search frictions and macroeconomic fluctuations. In Underground labor, search frictions and macroeconomic fluctuations.
Titolo: | Underground labor, search frictions and macroeconomic fluctuations |
Autori: | |
Data di pubblicazione: | 2012 |
Serie: | |
Citazione: | G., C., Giuli, F., & E., M. (2012). Underground labor, search frictions and macroeconomic fluctuations. In Underground labor, search frictions and macroeconomic fluctuations. |
Abstract: | We study the effects of underground activities on labour market dynamics in a RBC model with search frictions in the labor market, bargained wage and quadratic hiring costs. Underground activities, which allow agents to (partially) evade taxes, are modelled through a moonlighting production scheme where both regular and underground labor use the same capital equipment inside the firm. Calibrating the model on the U.S. economy, we show that a higher relative size of underground production implies lower average employment and a lower job finding rate, together with higher volatility of employment and lower volatilities of hours worked and wages of regular labor services. The theoretical explanation we provide is that a higher level of the underground activity increases the ratio of the flow contribution of non-working to the flow contribution of a worker to a labour match. |
Handle: | http://hdl.handle.net/11590/188994 |
Appare nelle tipologie: | 4.1 Contributo in Atti di convegno |