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Unemployment and the underground economy in Australia

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  • Christopher Bajada

Abstract

Despite government attempts to reduce welfare benefit fraud in Australia, participation in the underground economy by those claiming to be unemployed continues. Although there exists considerable international literature on the size of the underground economy, academics and public officials alike have paid little attention to the extent of participation in the underground economy by those who claim to be unemployed and in receipt of social security payments. This study provides the first known estimate of how changes in the unemployment rate affect the size and growth of the underground economy in Australia and the likely economic implications this may have for public policy decisions. We find that a number of unemployed Australians prefer to remain unemployed and work surreptitiously in the underground economy, while others, after becoming unemployed and finding legitimate employment, prefer to continue working in the underground economy.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 37 (2005)
Issue (Month): 2 ()
Pages: 177-189

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Handle: RePEc:taf:applec:v:37:y:2005:i:2:p:177-189

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References

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  1. Christopher Bajada, 2003. "Business Cycle Properties of the Legitimate and Underground Economy in Australia," The Economic Record, The Economic Society of Australia, vol. 79(247), pages 397-411, December.
  2. van Garderen, K.J., 1995. "Optimal prediction in loglinear models," Discussion Paper Series In Economics And Econometrics 9523, Economics Division, School of Social Sciences, University of Southampton.
  3. Wesley Clair Mitchell, 1927. "Business Cycles: The Problem and Its Setting," NBER Books, National Bureau of Economic Research, Inc, number mitc27-1.
  4. Wesley C. Mitchell & Solomon Fabricant, 1938. "Statistical Indicators of Cyclical Revivals," NBER Books, National Bureau of Economic Research, Inc, number mitc38-1.
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  6. Param Silvapulle & Mervyn J Silvapulle, 1997. "Business Cycle Asymmetry and the Stock Market," Working Papers 1997.22, School of Economics, La Trobe University.
  7. Frey, Bruno S. & Weck-Hanneman, Hannelore, 1984. "The hidden economy as an 'unobserved' variable," European Economic Review, Elsevier, vol. 26(1-2), pages 33-53.
  8. Harding, Don, 1997. "The Definition, Dating and Duration of Cycles," MPRA Paper 3357, University Library of Munich, Germany.
  9. Godfrey, Leslie G., 1978. "Testing for multiplicative heteroskedasticity," Journal of Econometrics, Elsevier, vol. 8(2), pages 227-236, October.
  10. Francis X. Diebold & Glenn D. Rudebusch, 1988. "Long memory and persistence in aggregate output," Finance and Economics Discussion Series 7, Board of Governors of the Federal Reserve System (U.S.).
  11. Domian, Dale L. & Louton, David A., 1995. "Business cycle asymmetry and the stock market," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(4), pages 451-466.
  12. Bajada, Christopher, 1999. "Estimates of the Underground Economy in Australia," The Economic Record, The Economic Society of Australia, vol. 75(231), pages 369-84, December.
  13. Wesley Clair Mitchell, 1927. "Introductory pages to "Business Cycles: The Problem and Its Setting"," NBER Chapters, in: Business Cycles: The Problem and Its Setting, pages -23 National Bureau of Economic Research, Inc.
  14. repec:ltr:wpaper:1997.22 is not listed on IDEAS
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Cited by:
  1. Roberto Dell'Anno & Offiong Helen Solomon, 2008. "Shadow economy and unemployment rate in USA: is there a structural relationship? An empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 40(19), pages 2537-2555.
  2. Christopher Bajada & Friedrich Schneider, 2009. "Unemployment and the Shadow Economy in the oecd," Revue ├ęconomique, Presses de Sciences-Po, vol. 60(5), pages 1033-1067.

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