A Critical Evaluation of the Policy Options Towards the Undeclared Economy
Journal of Self-Governance and Management Economics, Volume 2(4), 2014, pp. 7-52
46 Pages Posted: 27 Dec 2015
Date Written: 2014
To evaluate critically the policy options available for tackling the undeclared economy, this paper commences by evaluating the implications of four hypothetical policy choices, namely doing nothing, de-regulating the declared economy, eradicating the undeclared economy, or moving undeclared work into the declared economy. Finding that a combination of all these is required, a typology of policy measures for tackling the declared economy is then outlined. Drawing inspiration from the literature on eliciting behavior change in organizations, this identifies that the shift from direct controls (deterrents and incentives) to indirect controls (which engender a commitment to individual self-governance) can be scaled up to the societal level to elicit behavior change in relation to undeclared work. To shift towards the pursuit of individual self-governance as a means of achieving collective self-governance, a multi-pronged approach is called for which seeks to change both the codified laws and regulations of formal institutions and the norms, values and beliefs that constitute the informal institutions of a society in order to create symmetry between them. The paper concludes by discussing the various ways of combining and sequencing direct and indirect controls in a manner that foregrounds the centrality of individual self-governance to the achievement of collective self-governance.
Keywords: informal sector, underground economy, self-governance, public policy, institutional theory, wicked problems
JEL Classification: H26, J46, J48, K34, K42, O17, P2, P3
Suggested Citation: Suggested Citation