The aim of this contribution is to study the long-run e¤ects of selected policy measures on the steady state values of income and of the main labour market variables in economies characterised by the presence of search and matching frictions and undeclared work. To this aim, we calibrate a real business cycle model endowed with these characteristics on the U.S. economy and analyze its long run properties under a benchmark parameterization. These properties are later compared with those obtained when di¤erent types of labour market policies change the values of some key models parameters: the e¢ ciency of the matching technology; the productivity of regular hours worked; the scal burden on employment; the cost of job vacancy posting; the penalty rate the state applies to rms caught using underground work. Special attention is placed on the long-run response of employment/unemployment, hours worked, wages and the labor market tightness to these policy changes. The main conclusion we reach is that the most e¤ective reforms are those a¤ecting the e¢ ciency of the matching technology and the productivity of regular work.
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