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Market Comsumption And Hidden Consumption. A Test For Substitutability

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  • Bruno Chiarini
  • Elisabetta Marzano

    ()
    (Department of Economic Studies, Parthenope University of Naples)

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

Paper provided by D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy in its series Working Papers with number 7_2004.

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Length: 31 pages
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:prt:wpaper:7_2004

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References

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  1. repec:rtv:ceiswp:120 is not listed on IDEAS
  2. Ogaki, Masao & Park, Joon Y., 1997. "A cointegration approach to estimating preference parameters," Journal of Econometrics, Elsevier, vol. 82(1), pages 107-134.
  3. Feige, Edgar L, 1994. "The Underground Economy and the Currency Enigma," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 119-36.
  4. Bernard Fortin & Guy Lacroix & Claude Montmarquette, 1997. "Are Underground Workers More Likely To Be Underground Consumers?," CIRANO Working Papers 97s-28, CIRANO.
  5. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  6. 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.
  7. 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.
  8. 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.
  9. Chiarini Bruno & Marzano Elisabetta, 2004. "Dimensione e dinamica dell'economia sommersa: un approfondimento del "currency demand approach"," Politica economica, Società editrice il Mulino, issue 3, pages 303-334.
  10. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, September.
  11. 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.
  12. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, September.
  13. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244, September.
  14. 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.
  15. Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-27, March.
  16. Victor Ginsburgh, 2003. "Art markets," ULB Institutional Repository 2013/1865, ULB -- Universite Libre de Bruxelles.
  17. 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.
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Cited by:
  1. 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.
  2. repec:ebl:ecbull:v:3:y:2008:i:58:p:1-10 is not listed on IDEAS

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