CLS Working Papers, Centre for Labour Market and Social Research, Aarhus School of Business, University of Aarhus
Ebbe Krogh Graversen and Nina Smith
Tax Evasion and Work in the Underground Sector
Abstract: A bivariate random effect panel data model is estimated
for labour supply in the taxable and the non-taxable sectors in Denmark.
The results show that wage rates and non-labour income have significant
effects on labour supply in both sectors. For men, income taxes seem to
twist the labour supply away from taxed regular to untaxed underground
supply. For men, the average own wage elasticity with respect to
underground labour supply is 0.3 while the cross price elasticity from
wages is -0.6 and the income elasticity is -0.1. For women the results are
Keywords: Labour supply; Tax evasion; Censored bivariate panel data model.; (follow links to similar papers)
JEL-Codes: C33; C34; H26; J22; (follow links to similar papers)
22 pages, June 27, 2002
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