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Market consumption and hidden consumption. A test for substitutability

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  • Bruno Chiarini
  • Elisabetta Marzano

Abstract

In this paper an empirical analysis is performed on the relationship between private consumption and underground economy for the Italian case. It is found that private market consumption and underground (or hidden) consumption may be defined as 'complementary goods': an increase in underground consumption tends to increase family market consumption and increase its marginal utility. An implication of this result is that the nonmarket sector does not offer hedging opportunities to the consumer-worker as stressed by Busato and Chiarini's (2004) artificial economy. Moreover, wealth effects associated with a change in underground consumption are negative. A statistical model confirms this structural interpretation.

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Bibliographic Info

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

Volume (Year): 38 (2006)
Issue (Month): 6 ()
Pages: 707-716

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Handle: RePEc:taf:applec:v:38:y:2006:i:6:p:707-716

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  1. Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-27, March.
  2. Fortin, Bernard & Lacroix, Guy & Montmarquette, Claude, 2000. "Are Underground Workers More Likely to be Underground Consumers?," Economic Journal, Royal Economic Society, vol. 110(466), pages 838-60, October.
  3. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, Octomber.
  4. Lawrence J. Christiano & Martin Eichenbaum, 1990. "Current real business cycle theories and aggregate labor market fluctuations," Discussion Paper / Institute for Empirical Macroeconomics 24, Federal Reserve Bank of Minneapolis.
  5. Karras, Georgios, 1994. "Government Spending and Private Consumption: Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 9-22, February.
  6. Francesco Busato & Bruno Chiarini, 2004. "Market and underground activities in a two-sector dynamic equilibrium model," Economic Theory, Springer, vol. 23(4), pages 831-861, May.
  7. Ogaki, M. & Park, Y.Y., 1989. "A Cointegration Approach To Estimating Preference Parameters," RCER Working Papers 209, University of Rochester - Center for Economic Research (RCER).
  8. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  9. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  10. Bruno Chiarini & Elisabetta Marzano, 2004. "Dimensione E Dinamica Dell'Economia Sommersa: Un Approfondimento Del Currency Demand Approach," Working Papers 4_2004, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  11. Lemieux, Thomas & Fortin, Bernard & Frechette, Pierre, 1994. "The Effect of Taxes on Labor Supply in the Underground Economy," American Economic Review, American Economic Association, vol. 84(1), pages 231-54, March.
  12. Cochrane, John H, 1991. "A Simple Test of Consumption Insurance," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 957-76, October.
  13. Edgar L. Feige, 2005. "The Underground Economy And The Currency Enigma," Macroeconomics 0502004, EconWPA.
  14. repec:rtv:ceiswp:120 is not listed on IDEAS
  15. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, Octomber.
  16. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244, Octomber.
  17. Victor Ginsburgh, 2003. "Art markets," ULB Institutional Repository 2013/1865, ULB -- Universite Libre de Bruxelles.
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Cited by:
  1. repec:ebl:ecbull:v:3:y:2008:i:58:p:1-10 is not listed on IDEAS
  2. Yoke-Kee Eng & Chin-Yoong Wong, 2008. "A short note on business cycles of underground output: are they asymmetric?," Economics Bulletin, AccessEcon, vol. 3(58), pages 1-10.

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