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Underground economy and aggregate fluctuations

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Author Info

  • Juan Carlos Conesa
  • Carlos Diaz Moreno
  • Jose Enrique Galdon Sanchez

    (Universitat de Barcelona)

Abstract

This 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 Info

Paper provided by Universitat de Barcelona. Espai de Recerca en Economia in its series Working Papers in Economics with number 17.

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Length: 0 pages
Date of creation: 1997
Date of revision:
Handle: RePEc:bar:bedcje:199717

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Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques. Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona. Spain.
Web page: http://www.ere.ub.es
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Cited by:
  1. Amedeo Argentiero & Michele Bagella & Francesco Busato, 2008. "Money laundering in a two sector model: using theory for measurement," CEIS Research Paper 128, Tor Vergata University, CEIS, revised 09 Sep 2008.
  2. Francesco Busato & Bruno Charini & Enrico Marchetti, 2004. "Indeterminacy, Underground Activities and Tax Evasion," Economics Working Papers 2004-12, School of Economics and Management, University of Aarhus.
  3. Joanna Tyrowicz & Stanisław Cichocki, 2010. "Employed Unemployed? On Shadow Employment During Transition," Working Papers 2010-05, Faculty of Economic Sciences, University of Warsaw.
  4. Jose Maria Serrano & Maria Dolores Gadea, 2005. "What causes the hidden economy in Spain?," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 1(3), pages 143-150, May.
  5. Conesa, Juan Carlos & Diaz-Moreno, Carlos & Galdon-Sanchez, Jose Enrique, 2002. "Explaining cross-country differences in participation rates and aggregate fluctuations," Journal of Economic Dynamics and Control, Elsevier, vol. 26(2), pages 333-345, February.
  6. Ceyhun Elgin & Burak R. Uras, 2012. "Public Debt, Sovereign Default Risk and Shadow Economy," Working Papers 2012/10, Bogazici University, Department of Economics.
  7. Ceyhun Elgin, 2012. "Internet Usage and the Shadow Economy: Evidence from Panel Data," Working Papers 2012/09, Bogazici University, Department of Economics.
  8. Silvia Sgherri, 2005. "Long-Run Productivity Shifts and Cyclical Fluctuations," IMF Working Papers 05/228, International Monetary Fund.
  9. Maurizio Bovi & Peter Claeys, 2008. "Treasury V Dodgers. A Tale of Fiscal Consolidation and Tax Evasion," ISAE Working Papers 93 Classification-JEL E62, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  10. Francesco Busato & Bruno Chiarini & Enrico Marchetti, 2005. "Fiscal Policy under Indeterminacy and Tax Evasion," Economics Working Papers 2005-09, School of Economics and Management, University of Aarhus.
  11. Catalina Granda-Carvajal, 2010. "The Unofficial Economy and the Business Cycle: A Test for Theories," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 573-586.
  12. Renzo Orsi & Davide Raggi & Francesco Turino, 2014. "Size, Trend, and Policy Implications of the Underground Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(3), pages 417-436, July.
  13. Ceyhun Elgin & Friedrich Schneider, 2013. "Shadow Economies in OECD Countries: DGE vs. MIMIC Approaches," Working Papers 2013/13, Bogazici University, Department of Economics.

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