We study the underground economy within a dynamic and stochastic general equilibrium framework. Our model combines limited tax enforcement with an otherwise standard two- sector neoclassical stochastic growth model. The Bayesian estimation of the model based on Italian data provides evidence in favor of an important underground sector in Italy, with a size that has increased steadily over the whole sample period. We show that this pattern is due to a steady increase in taxation. Fiscal policy experiments suggest that a moderate tax cut, along with a stronger effort in the monitoring process, causes a sizeable reduction in the size of the underground economy and provides a positive stimulus for the regular economy. Both of these effects jointly increase total fiscal revenues.
Davide Raggi (Corresponding)
|Data di pubblicazione:||2014|
|Titolo:||Size, trend, and policy implications of the underground economy|
|Rivista:||REVIEW OF ECONOMIC DYNAMICS|
|Digital Object Identifier (DOI):||http://dx.doi.org/10.1016/j.red.2013.11.001|
|Appare nelle tipologie:||2.1 Articolo su rivista |