Doligalski, Paweł; Rojas, Luis E. - In: Theoretical economics : TE ; an open access journal in … 18 (2023) 2, pp. 749-791
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 …