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Indeterminacy, Underground Activities and Tax Evasion
Social Science Research Network
This paper introduces underground activities and tax evasion into a one sector dynamic general equilibrium model with aggregate external e ects. The model presents a novel mechanism driving the self-fulfilling prophecies, which is characterized by well behaved (downward sloping) labor demand schedules. This mechanism di ers from the customary one, and it is complementary to it. Compared to traditional labor market income, the income derived from underground labor activity is subject to a lowerdoi:10.2139/ssrn.1147585 fatcat:ojexc3hfwrfevmdwqfxnesmuuq