The Dynamics of the Informal Economy
This paper analyses the factors that give rise to the existence of the informal economy and how it evolves over time. Using an occupational-choice model the paper shows that at early stages of development, informal and formal markets coexists, but in the long-run the size of the informal economy can decline depending on the initial distribution of wealth. The model shows that the higher the initial wealth inequality the larger the size of the informal economy and the higher the wealth inequality will be in the long run. The paper calibrates the model using numerical simulations.
|Date of creation:||2010|
|Contact details of provider:|| Postal: Manor Road, Oxford, OX1 3UQ|
Phone: +44-(0)1865 271084
Fax: +44-(0)1865 281447
Web page: http://www.csae.ox.ac.uk/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:csa:wpaper:2010-07. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Payne)
If references are entirely missing, you can add them using this form.