Are Underground Workers More Likely to be Underground Consumers?

Bernard Fortin (), Guy Lacroix and Claude Montmarquette

Economic Journal, 2000, vol. 110, issue 466, 838-60

Abstract: We investigate the impact of working in the underground sector on the demand for underground commodities. Using a tax evasion model with costly information, we show that the presence of a network effect encourages underground workers to purchase underground commodities. The model is estimated using a unique Canadian microdata set for 1993. An increase in underground hours of work has a strong positive effect on the probability of purchasing underground commodities and on the level of expenditures. This relationship has a sizable effect on the impact of tax and enforcement parameters on the level of the underground economy.

Date: 2000
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Working Paper: Are Underground Workers More Likely To Be Underground Consumers? (1997)
Working Paper: Are Underground Workers More Likely to be Underground Consumers? (1997)
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