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A model of child support and the underground economy

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  • Roff, Jennifer
  • Lugo-Gil, Julieta

Abstract

We develop and estimate a model of the informal and formal employment decisions of American noncustodial fathers who have never married the mother of their child, as well as the paternity establishment decisions of the mothers. Fathers may evade child support payment through informal child support payments to induce the mother not to cooperate with the child support authorities or through underground work. To estimate the model, we use data drawn from the Fragile Families dataset and a discrete model of no work, part-time work and full-time work in both sectors, as well as paternal child support payment. Simulation results indicate that an increase in the order amount leads to small but statistically significant decreases in formal child support, as well as an increase in underground work.

Suggested Citation

  • Roff, Jennifer & Lugo-Gil, Julieta, 2012. "A model of child support and the underground economy," Labour Economics, Elsevier, vol. 19(5), pages 668-681.
    • Handle: RePEc:eee:labeco:v:19:y:2012:i:5:p:668-681
    DOI: 10.1016/j.labeco.2012.03.006
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    Cited by:

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    2. Rossin-Slater, Maya & Wüst, Miriam, 2018. "Parental responses to child support obligations: Evidence from administrative data," Journal of Public Economics, Elsevier, vol. 164(C), pages 183-196.
    3. Maya Rossin-Slater, 2017. "Signing Up New Fathers: Do Paternity Establishment Initiatives Increase Marriage, Parental Investment, and Child Well-Being?," American Economic Journal: Applied Economics, American Economic Association, vol. 9(2), pages 93-130, April.

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