What is to Be Done about Undeclared Work? An Evaluation of the Policy Options

Abstract

Grounded in the view that undeclared work is conducted under work relations akin to employment and motivated primarily by monetary gain, the thrust of public policy has been to deter this work by seeking to ensure that the expected cost of being caught and punished is greater than the potential economic benefits. Reviewing how recent research reveals that although some undeclared work is market-like and conducted for monetary gain, a large proportion is carried out under relations more akin to unpaid mutual aid, the implications of pursuing deterrence as well as other approaches are evaluated critically. The result is a proposal for a new policy approach that recognises the heterogeneous nature of undeclared work and seeks to actively facilitate its legitimisation.

Keywords: undeclared work, informal economy, informal sector, shadow economy, underground economy, public policy

JEL Classification: O17, H26, H31, K42