World Economics

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Title: Tackling the Undeclared Economy: The Effectiveness of Repressive and Trust-building Strategies
Author: Colin C Williams & Ioana Horodnic
Published: December 2020
Pages: 23-50
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Are participants in the undeclared economy rational economic actors who can be swayed by increasing the expected penalties and likelihood of detection? Or are they social actors who participate in reaction to a lack of vertical trust (in government) and horizontal trust (in others)? Evaluating a 2019 Eurobarometer survey, participation in undeclared work is weakly associated with the level of penalties, but there is a stronger, significantly greater likelihood of participation when there is a lower risk of detection and lower vertical and horizontal trust. The outcome is a call for the conventional repressive approach to be complemented with trust-building strategies.

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