Characteristics of the household sector of the hidden economy in an emerging economy

Sandra Sookram (), Friedrich Schneider () and Patrick Kent Watson ()
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Sandra Sookram: Sir Arthur Lewis Institute of Social & Economic Studies, University of the West Indies, St. Augustine, Trinidad & Tobago
Patrick Kent Watson: Sir Arthur Lewis Institute of Social & Economic Studies, University of the West Indies, St. Augustine, Trinidad & Tobago

No 2006-05, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

Abstract: Using the case study of Trinidad and Tobago we investigate for an emerging economy the socioeconomic, demographic, and attitudinal characteristics that influence the propensity of individuals in the household sector to participate in the hidden economy and their perception of the risk of detection by tax authorities in doing so. To this end we analyze data gathered from a unique cross-sectional field survey covering 570 households. Our econometric results using multinomial logit and ordered probit models suggest that individual household members are motivated to undertake hidden economic activity because they believe taxes are too high, their incomes are too low, they have dependents to support, and they believe that the resulting tax evasion will go undetected.

Keywords: hidden economy; multinomial logit and ordered probit models; emerging economies (search for similar items in EconPapers)
JEL-codes: C25 C51 E26 (search for similar items in EconPapers)
Date: 2006-05
New Economics Papers: this item is included in nep-dcm
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Persistent link: https://EconPapers.repec.org/RePEc:jku:econwp:2006_05

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