Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/159657
Authors: 
Orsi, Renzo
Raggi, Davide
Turino, Francesco
Year of Publication: 
2012
Series/Report no.: 
Quaderni - Working Paper DSE 818
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.
JEL: 
E65
O41
O52
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Working Paper

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