Entrepreneurship and the Hidden Economy: an Extended Matching Model

Gaetano Lisi and Maurizio Pugno

No 2009-04, Working Papers from Universita' di Cassino, Dipartimento di Economia e Giurisprudenza

Abstract: This paper develops a standard matching model to address the problem of the hidden sector (including non-registered firms but producing for legal markets), as it is characterised in Italy, i.e. framed in a rather advanced economic and institutional setting, but also linked to the socio-economic regional dualism. The main novel features of the model are that entrepreneurial ability is heterogeneous, and that regular firms receive negative externalities from the hidden sector, and positive externalities from the other regular firms. Not only does an interior equilibrium emerge, but two stable equilibria are possible, thus accounting for Italy’s dualism. The “bad” equilibrium with respect to the “good” one is in fact characterised by a larger hidden sector, lower levels of overall productivity, output, entrepreneurial ability used, extra-profits, skilled employment, wages, and investment in education, as well as positive externalities; while the negative externalities, which may capture the pressure typically exerted by organised crime, are relatively greater.

Keywords: entrepreneurship; hidden economy; shadow economy; underground economy; matching models (search for similar items in EconPapers)
JEL-codes: E26 J23 J24 J63 J64 L26 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2009-04
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://dipeg-wpe.unicas.it/dipse/files/wp200904.pdf Full text (application/pdf)

Related works:
Journal Article: Entrepreneurship and the Hidden Economy: An Extended Matching Model (2010)
Working Paper: Entrepreneurship and the Hidden Economy: An Extended Matching Model (2010)
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:css:wpaper:2009-04

Access Statistics for this paper

More papers in Working Papers from Universita' di Cassino, Dipartimento di Economia e Giurisprudenza Dipartimento di Economia e Giurisprudenza Via S. Angelo Loc. Folcara 03043 Cassino (FR) - Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Gennaro Zezza ().