Macroeconomic Implications of the Underground Sector: Challenging the Double Business Cycle Approach

Catalina Granda-Carvajal ()

Economic Analysis and Policy, 2012, vol. 42, issue 2, 237-256

Abstract: Within the literature on business cycles featuring underground activities, there is an approach based on the arguable premise that these are countercyclical. This paper develops a real business cycle model without such an assumption. Preferences are additively separable in formal and underground labor. Further, leisure time is spent on irregular work and non-market activities. Simulations permit examining how the model performs and comparing the results with related findings. Also, computational experiments allow analyzing the effects of taxes, enforcement and tastes for underground labor on aggregate fluctuations. These experiments offer a comprehensive view of the cyclical implications of the shadow economy.

Keywords: Underground economy; Shadow economy; Business cycles; Dynamic stochastic general equilibrium models (search for similar items in EconPapers)
JEL-codes: E26 E32 H26 O17 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (7)

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Working Paper: Macroeconomic Implications of the Underground Sector: Challenging the Double Business Cycle Approach (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:42:y:2012:i:2:p:237-256

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