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...

This article presents a two-sector dynamic general equilibrium model in which income smoothing takes place within the households (intra-temporally), and consumption smoothing takes place among the households (inter-temporally). Idiosyncratic risk-sharing within the family is based on an income...

In this paper a two sector dynamic general equilibrium model is developed in order to evaluate the implications of the underground economy from a business cycle perspective. There are three main results. First, introducing an underground sector improves the fit of the model to the data,...

The purpose of this paper is to investigate some issues of wage setting in order to assess if nominal inertia and wage flexibility characterize the Italian supply side, using multivariate cointegration models. The authors' estimates indicate that an explicit distinction between stationary and...

In this article we use optimal control techniques and a nonlinear, small-size econometric model of the Italian economy, with the purpose of analyzing the disinflation process that has characterized the Italian economy during the period 1984–1987. Within the optimization framework, we...

This paper introduces underground activities and tax evasion into a one sector dynamic general equilibrium model with external effects. The model presents a novel mechanism driving the self-fulfilling prophecies, which is triggered by the reallocation of resources to the underground sector to...