Underground economy modelling: simple models with complicated dynamics

Unknown, Preprint OPEN
Albu, Lucian-Liviu (2003)
  • Subject: E62 - Fiscal Policy | underground economy; labor supply method; Laffer curve; allocation of time; Lemieux model | C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis | H31 - Household | J22 - Time Allocation and Labor Supply | O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements | P36 - Consumer Economics ; Health ; Education and Training ; Welfare, Income, Wealth, and Poverty | D10 - General
    • jel: jel:D10 | jel:E62 | jel:H31 | jel:C61 | jel:P36 | jel:O17 | jel:J22

The paper aims to model the underground economy using two different models: one based on the labor supply method and a generalized model for the allocation of time. The model based on the labor supply method is conceived as a simulating one in order to determine some reasonable thresholds of the underground sector extension based only on the available macroeconomic statistical data. The generalized model for the allocation of time is a model based on direct approach which estimates the underground economy through extrapolation of the data collected from a limited number of households. Developing the Lemieux model, the map of the entire process of allocation of time was obtained.
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