Informal work networks

Informal work networks

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Article ID: iaor20111775
Volume: 44
Issue: 1
Start Page Number: 247
End Page Number: 272
Publication Date: Feb 2011
Journal: Canadian Journal of Economics/Revue canadienne d'conomique
Authors: ,
Keywords: employment, social networks
Abstract:

We present a model of time allocation between formal and informal labour supply, where workers learn of informal job opportunities from their peers. In addition to formal income taxation and enforcement, individuals’ labour supply decisions depend on the number of their peers with informal jobs and the strength of social ties. Workers allocate more time to informal activities when tax enforcement is lax and job information transmission is good. More connected social networks (e.g., wheel, complete) feature lower average income but higher average utility than poorly connected social networks (e.g., star, empty). Average income may be non-monotonic in tax enforcement.

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