Entrepreneurship and the Hidden Economy: An Extended Matching Model

Gaetano Lisi and Maurizio Pugno

International Economic Journal, 2010, vol. 24, issue 4, 587-605

Abstract: This paper develops a labour market matching model in order to address the problem of the persistence of the hidden sector and of its regional concentration, as in Italy and in the enlarged Europe. The main novel features of the model are that entrepreneurial ability affects job productivity, and that regular firms receive negative externalities from the hidden sector, which may capture the pressure typically exerted by corruption and organised crime, and positive externalities from the other regular firms. At least one interior equilibrium emerges, thus providing an explanation for the so-called 'shadow puzzle', with the possibility that tougher monitoring may reduce both the hidden sector and unemployment. If externalities are non-linear, two equilibria may emerge, thus accounting for regional dualism. The 'better' equilibrium is in fact characterised by a smaller hidden sector, higher levels of overall productivity, output, entrepreneurial ability used, extra-profits, relative wages, and more favourable externalities.

Keywords: Entrepreneurship; hidden economy; shadow economy; underground economy; matching models (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/10168737.2010.526000 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Entrepreneurship and the Hidden Economy: An Extended Matching Model (2010)
Working Paper: Entrepreneurship and the Hidden Economy: an Extended Matching Model (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:intecj:v:24:y:2010:i:4:p:587-605

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RIEJ20

DOI: 10.1080/10168737.2010.526000

Access Statistics for this article

International Economic Journal is currently edited by Jaymin Lee Editor

More articles in International Economic Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().