This paper develops a four-sector equilibrium search and matching model with informal sector employment opportunities and educational choice. We show that underground activities reduce educational attainments if informal employment opportunities mainly are available for low-educated workers. A...

This paper examines the effect of taxes on the individuals? choices of educational direction, and thus on the economy's skill composition. A proportional labour income tax induces too many workers with high innate ability to choose an educational type with high consumption value and low effort...

While examining the macroeconomic effects of government tax and punishment policies, this paper develops a three-sector general equilibrium model featuring matching frictions and worker-firm wage bargaining. Workers are assumed to differ in ability, and the choice of education is determined...

This paper is concerned with social interactions and their importance for unemployment. A theoretical model is specified in which the social and psychological costs of unemployment depend upon the unemployment level. The theoretical analysis reveals social multiplier effects, and shows that...