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Tackling the Underground Economy in Deprived Populations: A Critical Evaluation of the Deterrence Approach

PAM, Vol. 9 No. 3, (2004)

The aim of this paper is to evaluate critically the public policy approach that
seeks to tackle the underground economy in deprived populations by deterring people
from engaging in such work by ensuring that the expected cost of being caught and
punished is greater than the economic benefit of participating. Reporting evidence from
an extensive study of underground work in 861 households in contemporary England, this
paper uncovers that although some underground work in such populations is conducted
for purely money-making purposes, the majority is carried out for friends, neighbors and
kin for rationales associated with redistribution and building social capital rather than
purely to make or save money. As such, the argument here is that unless governments seek
to develop substitute mechanisms to enable engagement in such paid favors but on a
legitimate basis alongside deterrence measures, then attempts to tackle the underground
economy in deprived populations will end up destroying the social support networks that
other realms of public policy are presently so actively seeking to develop. The paper
concludes by providing an outline of the public policy changes required.

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