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Market consumpition and hidden consumption. A test for substitutability

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  • Bruno Chiarini
  • Elisabetta Marzano

Abstract

In this paper we perform an empirical analysis on the relationship between private consumption and underground economy for the Italian case. We find that private market consumption and underground (or hidden) consumption may be defined as ''complementary goods'': an increase in underground consumption tends to rise 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 in Busato and Chiarini (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, 2005. "Market consumpition and hidden consumption. A test for substitutability," Working Papers in Public Economics 79, University of Rome La Sapienza, Department of Economics and Law.
    • Handle: RePEc:sap:wpaper:wp79
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    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.

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    More about this item

    Keywords

    underground economy; underground consumption.;

    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

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