@techreport{Kanniainen2004Anonymous,
abstract = {Some markets are prone to develop shadow transactions for the purpose of tax avoidance.
Moral sentiments control the allocation of consumers between the legal and illicit markets.
Such sentiments include self-esteem and social disapproval. The market solution leads to
fiscal externality resulting from tax avoidance and highlights the conflict between private
opportunism and collective values. Shadow markets may, however, enhance consumer
welfare by limiting the pricing power of firms and by controlling tax collection. The paper
develops a model of endogenous segmentation of markets between moral and immoral
behavior. The legal producer can price the self-esteem of honest people, who can blackmail
the legal producer with their option of visiting the illicit market. The model has implications
for monetary economics: moral sentiments, tax rates, illegal transactions, and probability of
being caught become relevant for the demand for money.},
author = {Vesa Kanniainen and Jenni P\"{a}\"{a}kk\"{o}nen},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {D43; L13; H26; E41; D69; 330; moral sentiments; shadow economy; welfare; Ethik; Schattenwirtschaft; Wohlfahrtseffekt},
language = {eng},
number = {1258},
title = {Anonymous money, moral sentiments and welfare},
type = {CESifo working papers},
url = {http://hdl.handle.net/10419/18896},
year = {2004}
}
