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A note on informality and public trust

Ceyhun Elgin and Hasan kadir Tosun ()
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Hasan kadir Tosun: University of Minnesota

Economics Bulletin, 2017, vol. 37, issue 4, 2595-2601

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.

Keywords: Informal economy; public trust; government reputation (search for similar items in EconPapers)
JEL-codes: H2 H3 (search for similar items in EconPapers)
Date: 2017-11-19
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