Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
9724139 | European Journal of Political Economy | 2005 | 21 Pages |
Abstract
This paper studies an economy with high- and low-productivity households. Household services are produced either by households themselves or are purchased in a white or black market. Black market work is inefficient (efficient) when it otherwise would have been done in the white market (within the household). With low (high) tax wedges, the black market reduces (increases) welfare by competing with white-market production (own-household production). With intermediate tax wedges, the welfare effect of a black market is ambiguous: welfare is improved (reduced) when black services are demanded by low- (high-) productivity households. An increase in the tax wedge may then reduce the benefits from a black service market.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Jon Strand,