White, black, and green multipliers: Effects of white, black, and green sector activities on the economy and on the development of consumer services

Abstract

The effects of production and consumption in the informal sectors, i.e., the black sector (illegal because of tax evasion) and the green (household) sector, are described by a macro model. Effects upon employment, balance of payments, and public deficit are considered. Empirical implementation with Danish data shows that the black and green sectors have negligible effects on the government deficit, and that activities in the green sector are much more harmful to white employment and the balance of payments than are activities in the black sector. The results indicate that formal and informal production of services — the major part of the black and green sectors — could be increased without much damage to the balance of payments and the government deficit. Whether such an increase of service production would also solve the social problems related to unemployment is more debatable, since many service jobs are likely to be considered by the public as unproductive uses of labour.