Abstract
This paper is concerned with the policy implications of the combined presence of a regular observed and an irregular unobserved sector. It develops a two-sector model in which the regular sector is subject to fixed prices and wages, while the irregular sector wages may move freely. A number of regimes are shown to be possible and for each, we examine the effects of different policies on regular and overall employment. Ignorance of the existence of an irregular sector can lead to employment policies which ultimately reduce the overall level of employment.
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© 1985 Springer-Verlag Berlin Heidelberg
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Ginsburgh, V., Michel, P., Schioppa, F.P., Pestieau, P. (1985). Macroeconomic Policy in the Presence of an Irregular Sector. In: Gaertner, W., Wenig, A. (eds) The Economics of the Shadow Economy. Studies in Contemporary Economics, vol 15. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-88408-5_12
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DOI: https://doi.org/10.1007/978-3-642-88408-5_12
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-15095-4
Online ISBN: 978-3-642-88408-5
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