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Demand-Side Incentives to Combat the Underground Economy: Some Lessons from France and Belgium

Author: JAN WINDEBANK
Published in IJED, Vol. 6 No. 2

This paper evaluates critically the currently dominant public policy approach towards underground work that primarily pursues supply-side deterrence measures and then investigates how demand-side incentives might be used to supplement this approach. To show how this could be achieved, the experiences of France and Belgium where voucher schemes have been used to encourage customers to use formal rather than underground labor are evaluated. Analyzing the Local Employment Agency and Service Voucher schemes in Belgium and the Cheque Emploi
Service (CES) and Titre Emploi Service (TES) schemes in France, this paper finds that given the evidence of their apparent effectiveness in combating underground work in these countries, there is a case for other advanced market economies giving greater consideration to complementing their supply-side deterrence measures with similar demand-side incentives.

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