IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v38y2006i6p707-716.html
   My bibliography  Save this article

Market consumption and hidden consumption. A test for substitutability

Author

Listed:
  • Bruno Chiarini
  • Elisabetta Marzano

Abstract

In this paper an empirical analysis is performed on the relationship between private consumption and underground economy for the Italian case. It is found that private market consumption and underground (or hidden) consumption may be defined as 'complementary goods': an increase in underground consumption tends to increase family market consumption and increase its marginal utility. An implication of this result is that the nonmarket sector does not offer hedging opportunities to the consumer-worker as stressed by Busato and Chiarini's (2004) artificial economy. Moreover, wealth effects associated with a change in underground consumption are negative. A statistical model confirms this structural interpretation.

Suggested Citation

  • Bruno Chiarini & Elisabetta Marzano, 2006. "Market consumption and hidden consumption. A test for substitutability," Applied Economics, Taylor & Francis Journals, vol. 38(6), pages 707-716.
    • Handle: RePEc:taf:applec:v:38:y:2006:i:6:p:707-716
    DOI: 10.1080/00036840500396632
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840500396632
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036840500396632?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Victor A. Ginsburgh, 2003. "Art markets," Chapters, in: Ruth Towse (ed.), A Handbook of Cultural Economics, chapter 4, Edward Elgar Publishing.
    2. Karras, Georgios, 1994. "Government Spending and Private Consumption: Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 9-22, February.
    3. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, vol. 82(3), pages 430-450, June.
    4. Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-127, March.
    5. Fortin, Bernard & Lacroix, Guy & Montmarquette, Claude, 2000. "Are Underground Workers More Likely to be Underground Consumers?," Economic Journal, Royal Economic Society, vol. 110(466), pages 838-860, October.
    6. repec:rtv:ceiswp:120 is not listed on IDEAS
    7. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    8. Lemieux, Thomas & Fortin, Bernard & Frechette, Pierre, 1994. "The Effect of Taxes on Labor Supply in the Underground Economy," American Economic Review, American Economic Association, vol. 84(1), pages 231-254, March.
    9. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
    10. Cochrane, John H, 1991. "A Simple Test of Consumption Insurance," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 957-976, October.
    11. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    12. Ogaki, Masao & Park, Joon Y., 1997. "A cointegration approach to estimating preference parameters," Journal of Econometrics, Elsevier, vol. 82(1), pages 107-134.
    13. Matyas,Laszlo (ed.), 1999. "Generalized Method of Moments Estimation," Cambridge Books, Cambridge University Press, number 9780521669672, October.
    14. J. B. Taylor & M. Woodford (ed.), 1999. "Handbook of Macroeconomics," Handbook of Macroeconomics, Elsevier, edition 1, volume 1, number 1.
    15. Francesco Busato & Bruno Chiarini, 2004. "Market and underground activities in a two-sector dynamic equilibrium model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 23(4), pages 831-861, May.
    16. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    17. Feige, Edgar L, 1994. "The Underground Economy and the Currency Enigma," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 119-136.
    18. Victor Ginsburgh & Marie Christine Adam, 1985. "The Effects of Irregular Markets on Macroeconomic Policy," ULB Institutional Repository 2013/151090, ULB -- Universite Libre de Bruxelles.
    19. Bruno Chiarini & Elisabetta Marzano, 2004. "Dimensione e dinamica dell'economia sommersa: un approfondimento del "currency demand approach"," Politica economica, Società editrice il Mulino, issue 3, pages 303-334.
    20. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
    21. Matyas,Laszlo (ed.), 1999. "Generalized Method of Moments Estimation," Cambridge Books, Cambridge University Press, number 9780521660136, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Erotokritos Varelas, 2020. "Expectations about Unreported Output, Bank Lending and Double-Cycle Stability Policy," Bulletin of Applied Economics, Risk Market Journals, vol. 7(1), pages 67-81.
    2. repec:ebl:ecbull:v:3:y:2008:i:58:p:1-10 is not listed on IDEAS
    3. Yoke-Kee Eng & Chin-Yoong Wong, 2008. "A short note on business cycles of underground output: are they asymmetric?," Economics Bulletin, AccessEcon, vol. 3(58), pages 1-10.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dawood, Taufiq Carnegie & Francois, John Nana, 2018. "Substitution between private and government consumption in African economies," Economic Modelling, Elsevier, vol. 73(C), pages 129-139.
    2. André Kallåk Anundsen & Ragnar Nymoen, 2015. "Did US Consumers 'Save for a Rainy Day' Before the Great Recession?," CESifo Working Paper Series 5347, CESifo.
    3. Arbex, Marcelo, 2013. "Tax enforcement policies, tax evasion and time allocation," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(3), pages 285-293.
    4. Brunila, Anne, 1996. "Fiscal policy and private consumption: Saving decisions: Evidence from Finland," Bank of Finland Research Discussion Papers 28/1996, Bank of Finland.
    5. Pierfederico Asdrubali & Simone Tedeschi & Luigi Ventura, 2020. "Household risk‐sharing channels," Quantitative Economics, Econometric Society, vol. 11(3), pages 1109-1142, July.
    6. repec:zbw:bofrdp:1996_028 is not listed on IDEAS
    7. Brunila, Anne, 1996. "Fiscal policy and private consumption : Saving decisions : Evidence from Finland," Research Discussion Papers 28/1996, Bank of Finland.
    8. Fiorito, Riccardo & Kollintzas, Tryphon, 2004. "Public goods, merit goods, and the relation between private and government consumption," European Economic Review, Elsevier, vol. 48(6), pages 1367-1398, December.
    9. Brunila, Anne, 1997. "Current income and private consumption : Saving decisions : Testing the finite horizon model," Research Discussion Papers 6/1997, Bank of Finland.
    10. repec:zbw:bofrdp:1997_006 is not listed on IDEAS
    11. Brunila, Anne, 1997. "Current income and private consumption: Saving decisions: Testing the finite horizon model," Bank of Finland Research Discussion Papers 6/1997, Bank of Finland.
    12. Luca Guerrieri & Christopher Gust & J. David López-Salido, 2010. "International Competition and Inflation: A New Keynesian Perspective," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 247-280, October.
    13. Amir Kia, 2006. "Deficits, Debt Financing, Monetary Policy and Inflation in Developing Countries: Internal or External Factors? Evidence from Iran," Carleton Economic Papers 06-03, Carleton University, Department of Economics, revised Nov 2006.
    14. Jacobs, Kris, 2000. "Estimating Nonseparable Preference Specifications for Asset Market Participants," Econometric Society World Congress 2000 Contributed Papers 1472, Econometric Society.
    15. Chiarini, Bruno & Ferrara, Maria & Marzano, Elisabetta, 2022. "Tax evasion and financial accelerator: A corporate sector analysis for the US business cycle," Economic Modelling, Elsevier, vol. 108(C).
    16. Zoë Kuehn, 2014. "Tax Rates, Governance, And The Informal Economy In High-Income Countries," Economic Inquiry, Western Economic Association International, vol. 52(1), pages 405-430, January.
    17. Snell, Andy, 1998. "Testing for r versus r-1 cointegrating vectors," Journal of Econometrics, Elsevier, vol. 88(1), pages 151-191, November.
    18. O.A. Fadeyi & A.A. Ogundeji & B.J. Willemse, 2014. "Establishing the linkages between the South African agricultural trade balance and macroeconomic indicators," Agrekon, Taylor & Francis Journals, vol. 53(4), pages 92-105, November.
    19. Friedrich Schneider, 2000. "Illegal activities, but still values added ones (?): size, causes, and measurement of the shadow economies all over the world," Economics working papers 2000-10, Department of Economics, Johannes Kepler University Linz, Austria.
    20. Thomas Glauben & Jens-Peter Loy & Julia Körner, 2007. "Der Einfluss der Euro-Einführung auf die Preisentwicklung bei frischen Lebensmitteln in Deutschland," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(3), pages 457-485.
    21. Byrne, Joseph P. & Nagayasu, Jun, 2010. "Structural breaks in the real exchange rate and real interest rate relationship," Global Finance Journal, Elsevier, vol. 21(2), pages 138-151.
    22. Urvashi Dhawan & Bagala Biswal, 1999. "Re-examining export-led growth hypothesis: a multivariate cointegration analysis for India," Applied Economics, Taylor & Francis Journals, vol. 31(4), pages 525-530.

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:38:y:2006:i:6:p:707-716. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.