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A note on informality and public trust

Author

Listed:
  • Ceyhun Elgin

    (Bogazici University)

  • Hasan kadir Tosun

    (University of Minnesota)

Abstract

Empirical evidence indicates that the level of informality is negatively correlated with the public trust in government. In this paper, we aim to account for this observation by constructing a model where government type cannot be directly observed by households. We characterize the Markov perfect equilibrium and show that public trust may account for the presence as well as persistence of informality.

Suggested Citation

  • Ceyhun Elgin & Hasan kadir Tosun, 2017. "A note on informality and public trust," Economics Bulletin, AccessEcon, vol. 37(4), pages 2595-2601.
  • Handle: RePEc:ebl:ecbull:eb-17-00472
    as

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    References listed on IDEAS

    as
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    5. D’Hernoncourt, Johanna & Méon, Pierre-Guillaume, 2012. "The not so dark side of trust: Does trust increase the size of the shadow economy?," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 97-121.
    6. Araujo, Ricardo Azevedo & de Souza, Nathalia Almeida, 2010. "An evolutionary game theory approach to the dynamics of the labour market: A formal and informal perspective," Structural Change and Economic Dynamics, Elsevier, vol. 21(2), pages 101-110, May.
    7. Dabla-Norris, Era & Gradstein, Mark & Inchauste, Gabriela, 2008. "What causes firms to hide output? The determinants of informality," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 1-27, February.
    8. Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June.
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    10. Ceyhun Elgin & Oguz Oztunali, 2012. "Shadow Economies around the World: Model Based Estimates," Working Papers 2012/05, Bogazici University, Department of Economics.
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    Cited by:

    1. Ceyhun Elgin & Ferda Erturk, 2019. "Informal economies around the world: measures, determinants and consequences," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 9(2), pages 221-237, June.

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    More about this item

    Keywords

    Informal economy; public trust; government reputation;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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