Underground economy and aggregate fluctuations
AbstractThis paper explores the role of underground economic activities as an explanation for cross-country differences in registered aggregate fluctuations. In order to do so, we develop a two-sector Real Business Cycle model calibrated to the USA economy. In our model, individuals will participate or not in registered economic activities according to the wage premium, i.e. the ratio of average wages to the minimum wage. Our main result is that exogenously specified differences in the wage premium could account for the high range of registered aggregate fluctuations found across countries.
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Bibliographic InfoPaper provided by Universitat de Barcelona. Espai de Recerca en Economia in its series Working Papers in Economics with number 17.
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Date of creation: 1997
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Postal: Espai de Recerca en Economia, Facultat de CiÃ¨ncies EconÃ²miques. Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona. Spain.
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Other versions of this item:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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- Renzo Orsi & Davide Raggi & Francesco Turino, 2013. "Online Appendix to "Size, Trend, and Policy Implications of the Underground Economy"," Technical Appendices 12-217, Review of Economic Dynamics.
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