TY  - RPRT
        AU  - Mbara, Gilbert
AU  - Tyrowicz, Joanna
AU  - Kokoszczynski, Ryszard
        TI  - Striking a Balance: Optimal Tax Policy with Labor Market Duality
        PY  - 2020/Aug/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 13631
        UR  - https://www.iza.org/index.php/publications/dp13631
        AB  - This paper develops a dynamic general equilibrium model where employers may avoid making social security contributions by offering some workers "secondary contracts". When calibrated using aggregate tax revenue data, the model delivers estimates of secondary "off the books" employment that are consistent with survey evidence for the EU14 and United States. We investigate the fiscal and welfare effects of varying the avoidable and unavoidable shares of labor income tax while keeping the total wedge constant, and find that increasing the employer component raises hours worked, output, and welfare. Partial labor tax evasion makes tax revenues more elastic, but full tax compliance need not be a welfare enhancing policy mix.
        KW  - tax evasion
KW  - labor market duality
KW  - Laffer Curve
        ER  -