Tackling undeclared work in the European Union: beyond the rational economic actor approach

Abstract

ABSTRACT To tackle the undeclared economy, an emergent literature has called for the dominant “rational economic actor” approach, which increases the sanctions and risk of detection, to be replaced and/or complemented by a “social actor” approach that fosters citizens’ commitment to compliance. Reporting two waves of the Eurobarometer survey conducted in 2007 and 2013 across Europe, fixed-effects logistic regression analysis reveals that although both approaches reduce participation in undeclared work, the strength of the impact of deterrents on the likelihood of participation in undeclared work has weakened between 2007 and 2013, but has strengthened for vertical and horizontal trust. The paper concludes by discussing the policy implications of these findings.