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| Ceyhun Elgin and Hasan kadir Tosun |
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| ''A note on informality and public trust'' |
| ( 2017, Vol. 37 No.4 ) |
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| Empirical evidence indicates that the level of informality is negatively correlated with the public trust in government. In this paper, we aim to account for this observation by constructing a model where government type cannot be directly observed by households. We characterize the Markov perfect equilibrium and show that public trust may account for the presence as well as persistence of informality. |
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| Keywords: Informal economy, public trust, government reputation |
JEL: H2 - Taxation, Subsidies, and Revenue: General
H3 - Fiscal Policies and Behavior of Economic Agents: General |
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| Manuscript Received : Jun 15 2017 | | Manuscript Accepted : Nov 19 2017 |
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