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Environmental regulation in the presence of unrecorded economy

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  • Fatih Karanfil

Abstract

Both theoretical and empirical studies which do not take into account the existence of unrecorded economy may not provide a complete insight on the effects of fiscal and environmental enforcement policies in developing countries, where unrecorded economic activities have an important weight. This study attempts to fill that void. Two different cases are considered: first, firms’ production and emissions are audited with different exogenous probabilities; second, a unique probability-to-audit function is determined to audit both emission and production levels of firms, whether in recorded or unrecorded economy. The paper determines the conditions under which environmental regulations may increase the size of unrecorded economy.

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Bibliographic Info

Article provided by CEPII research center in its journal International Economics/Economie Internationale.

Volume (Year): (2011)
Issue (Month): 126-127 ()
Pages: 91-108

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Handle: RePEc:cii:cepiei:2011-q2-3-126-127-6

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Keywords: Environmental Taxation; Unrecorded Economy; Duopolistic Competition;

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  1. Fatih Savasan, 2003. "Modeling the Underground Economy in Turkey: Randomized Response and MIMIC Models," The Journal of Economics, Missouri Valley Economic Association, vol. 29(1), pages 49-76.
  2. Ines Macho-Stadler & David Pérez-Castrillo, 2004. "Optimal Enforcement Policy and Firms’ Emissions and Compliance with Environmental Taxes," CESifo Working Paper Series 1193, CESifo Group Munich.
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