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Characteristics of the household sector of the hidden economy in an emerging economy

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Abstract

Using the case study of Trinidad and Tobago we investigate for an emerging economy the socioeconomic, demographic, and attitudinal characteristics that influence the propensity of individuals in the household sector to participate in the hidden economy and their perception of the risk of detection by tax authorities in doing so. To this end we analyze data gathered from a unique cross-sectional field survey covering 570 households. Our econometric results using multinomial logit and ordered probit models suggest that individual household members are motivated to undertake hidden economic activity because they believe taxes are too high, their incomes are too low, they have dependents to support, and they believe that the resulting tax evasion will go undetected.

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  • Sandra Sookram & Friedrich G. Schneider & Patrick Kent Watson, 2006. "Characteristics of the household sector of the hidden economy in an emerging economy," Economics working papers 2006-05, Department of Economics, Johannes Kepler University Linz, Austria.
    • Handle: RePEc:jku:econwp:2006_05
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    More about this item

    Keywords

    hidden economy; multinomial logit and ordered probit models; emerging economies;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy

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