A general equilibrium model is proposed which assumes that firms hire both official and unregistered labour as imperfect substitutes, and that the efficiency of official labour can be increased by heterogeneous ability of the entrepreneurs and by Marshallian non-linear externalities, i.e., externalities arise if firms are sufficiently numerous. Two stable equilibria are possible representing a developed and an underdeveloped economy. In the ‘‘good’’ equilibrium the number and the size of firms, the proportion of official employment, overall output and efficiency are greater than in the ‘‘bad’’ equilibrium. Different kinds of policy with which to reduce the underground economy and to enhance development are studied.

The underground economy and underdevelopment

PUGNO, Maurizio
2004

Abstract

A general equilibrium model is proposed which assumes that firms hire both official and unregistered labour as imperfect substitutes, and that the efficiency of official labour can be increased by heterogeneous ability of the entrepreneurs and by Marshallian non-linear externalities, i.e., externalities arise if firms are sufficiently numerous. Two stable equilibria are possible representing a developed and an underdeveloped economy. In the ‘‘good’’ equilibrium the number and the size of firms, the proportion of official employment, overall output and efficiency are greater than in the ‘‘bad’’ equilibrium. Different kinds of policy with which to reduce the underground economy and to enhance development are studied.
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11580/8508
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo

Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 12
social impact