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Are Underground Workers More Likely to be Underground Consumers?

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  • Fortin, Bernard
  • Lacroix, Guy
  • Montmarquette, Claude

Abstract

We investigate the impact of working in the underground sector on the demand for underground commodities. Using a tax evasion model with costly information, we show that the presence of a network effect encourages underground workers to purchase underground commodities. The model is estimated using a unique Canadian microdata set for 1993. An increase in underground hours of work has a strong positive effect on the probability of purchasing underground commodities and on the level of expenditures. This relationship has a sizable effect on the impact of tax and enforcement parameters on the level of the underground economy.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 110 (2000)
Issue (Month): 466 (October)
Pages: 838-60

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Handle: RePEc:ecj:econjl:v:110:y:2000:i:466:p:838-60

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  1. Stapleton, David C & Young, Douglas J, 1984. "Censored Normal Regression with Measurement Error on the Dependent Variable," Econometrica, Econometric Society, vol. 52(3), pages 737-60, May.
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Cited by:
  1. François Gardes & Christophe Starzec, 2009. "Polish Households' behavior in the Regular and Informal Economies," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00375543, HAL.
  2. Benoit Dostie & Désiré Vencatachellum, 2004. "Compulsory and Voluntary Remittances: Evidence from Child Domestic Workers in Tunisia," Cahiers de recherche 04-04, HEC Montréal, Institut d'économie appliquée.
  3. Amedeo Piolatto, 2014. "Itemised deductions: a device to reduce tax evasion," Working Papers 2014/9, Institut d'Economia de Barcelona (IEB).
  4. Brück, Tilman & Haisken-DeNew, John P. & Zimmermann, Klaus F., 2003. "Creating Low Skilled Jobs by Subsidizing Market-Contracted Household Work," IZA Discussion Papers 958, Institute for the Study of Labor (IZA).
  5. Marcus Böhme, Rainer Thiele, 2012. "Informal-formal Linkages and Informal Enterprise Performance in Urban West Africa," Kiel Working Papers 1751, Kiel Institute for the World Economy.
  6. Thiele, Rainer & Böhme, Marcus, 2011. "Is the Informal Sector Constrained from the Demand Side? Evidence for Six West African Capitals," Proceedings of the German Development Economics Conference, Berlin 2011 76, Verein für Socialpolitik, Research Committee Development Economics.
  7. Casola, Luca & Kemp, Simon & Mackenzie, Alexander, 2009. "Consumer decisions in the black market for stolen or counterfeit goods," Journal of Economic Psychology, Elsevier, vol. 30(2), pages 162-171, April.
  8. Bruno Chiarini & Elisabetta Marzano, 2006. "Market consumption and hidden consumption. A test for substitutability," Applied Economics, Taylor & Francis Journals, vol. 38(6), pages 707-716.
  9. Philippe Adair, 2009. "Économie non observée et emploi informel dans les pays de l'Union européenne. Une comparaison des estimations et des déterminants," Revue économique, Presses de Sciences-Po, vol. 60(5), pages 1117-1153.
  10. Piolatto, Amedeo, 2008. "Tax evasion and deductible expenses," MPRA Paper 10136, University Library of Munich, Germany, revised Jul 2008.
  11. Jan Hanousek & Filip Palda, 2002. "The Evolution of Tax Evasion in the Czech Republic: A Markov Chain Analysis," Public Economics 0205002, EconWPA.

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