Tackling Undeclared Work. Suggestions from a Business Cycle Model with Search Frictions

Giuseppe Ciccarone, Francesco Giuli and Enrico Marchetti

Economia politica, 2014, issue 2, 125-148

Abstract: The paper evaluates the relative effect of deterrence, prevention, curative and commitment policy measures on the size of undeclared work in a real business cycle model with undeclared work, tax evasion and search frictions in the labour market. A numerical application of the model to the European economy shows that all these approaches reduce the undeclared share of output, but that deterrence and commitment policies also produce a negative effect on stationary employment. The curative approach produces the sharper fall in undeclared work while stimulating stationary output and employment.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:mul:jb33yl:doi:10.1428/77434:y:2014:i:2:p:125-148

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