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Market consumption and hidden consumption. A test for substitutability

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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.
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Document Type: Research Article

Affiliations: Department of Economics, University of Naples “Parthenope”, Via Medina 40, 80133 , Napoli, Italy

Publication date: 2006-04-10

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