Household production and taxation: a theoretical and empirical analysis

Project managerJon Strand
ClientNorges forskningsråd
Client project no.
Period2001 - 2001 (ended)

Project description

The purpose of the project is to study effects of the tax system on the structure of production and consumption of household services. We study the distribution of total production of such services between the households themselves and two types of market activities, namely regular ("white") production subject to taxation, and irregular ("black") production where tax evasion is attempted. The departure point is the principal idea, and empirical fact, that high tax wedges pushes much household production activity out of the "white" market and into the household production sphere. Black markets will then often arise to absorb part of this activity. One objective of the project is to study efficiency aspects of a black market in such situations, in particular how the possible efficiency of having a black market depends on whether this market absorbs activity from the white market or from the household sphere. We will consider cases where individuals' productivities in regular and household production differs, and where some workers may be unemployed in which case their propensity to supply labor to the black market increases. We will also consider cases where immigrants (and possibly illegals) wish to join the black market, for reasons of the anonymity that this market creates. A number of empirical issues will also be attempted dealt with in the project. First, we want to study the amount of household production activity in the sectors where black markets may be prevalent, using data from the time use surveys of Statistics Norway, from 1980, 1990 and 2000. Secondly, we wish to study (if possible) the activity of black markets and their size and structure, in Norway currently, through a sample survey of the Norwegian population. It is here particularly relevant to find out whether black market primarily absorbs activity that else would have been produced in the home, or in the white market, or would not have been produced at all. Thirdly, we want to conduct cross-section studies across countries, to find out how the sizes of black sectors, and of equivalent white sectors, depend on tax wedges. This will give indications on the degree of inefficiency created by the tax system, for the nature and composition of household production.



This series is published by the Department of Economics, University of Oslo, in cooperation with the Frisch Centre. The list below only contains those memoranda written in connection with projects at the Frisch Centre. A complete list of memoranda is found at http://urn.nb.no/URN:NBN:no-7118

Schwierz, ChristophThe Effects of Taxes and Socioeconomic Variables on Market Work and Home Production in Norway in the Years 1970 to 20002003No. 33[PDF]