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model, workers can supply labor simultaneously to the formal and the informal sectors, which we call moonlighting. The … optimal tax formula contains two novel terms capturing informality responses on an intensive and an extensive margin. Both … terms decrease the optimal tax rates. We estimate the model with Colombian data and find that informality strongly reduces …
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We build a general equilibrium model in which both illegal immigration and the size of the informal sector are endogenously determined. In this framework, we show that indirect policy measures such as tax reduction and detection of informal activities can be used as substitutes for border...
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