Informality: Family Ties and Retirement Income

This paper suggests a demand side analysis of informal employmentcharacterised by incompliances with labour tax regulation, using a general equilibrium model with overlapping generations. A public social insurance provide benefits to formal employees in retirement, while we allow for an informal insurance mechanism for informal employees through a social norm of mutual support. The objective of the paper is to evaluate impact of auditing policy and social norms on growth and social welfare. We define the private transfer rate to the informal population and provide an analysis on the impact of social norms to wage levels, growth and welfare.