Size, Trend, and Policy Implications of the Underground Economy

Orsi, Renzo ; Raggi, Davide ; Turino, Francesco (2012) Size, Trend, and Policy Implications of the Underground Economy. Bologna: Dipartimento di Scienze economiche DSE, p. 55. DOI 10.6092/unibo/amsacta/4198. In: Quaderni - Working Paper DSE (818). ISSN 2282-6483.
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Abstract

We study the underground economy in a dynamic and stochastic general equilibrium framework. Our model combines limited tax enforcement with an otherwise standard two-sector neoclassical stochastic growth model. The Bayesian estimation of the model based on Italian data provides evidence in favor of an important underground sector in Italy, with a size that has steadily increased over the whole sample period. We show that this pattern is due to a persistent increase in taxation. Fiscal policy experiments suggest that a moderate tax cut, along with a stronger effort in the monitoring process, causes a sensitive reduction in the size of the underground economy and positive stimulus to the regular sector that jointly increase the total fiscal revenues.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Orsi, Renzo
Raggi, Davide
Turino, Francesco
Keywords
DSGE, Underground Economy, Tax Evasion, Bayesian Estimation, Italy
Subjects
ISSN
2282-6483
DOI
Deposit date
20 Mar 2015 10:14
Last modified
31 Mar 2015 13:39
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