Abstract:
Despite government attempts to reduce welfare benefit fraud in Australia,
participation in the underground economy by those claiming to be unemployed
continues. Although there exists considerable international literature
on the size of the underground economy, academics and public
officials alike have paid little attention to the extent of participation in
the underground economy by those who claim to be unemployed and in
receipt of social security payments. This study provides the first known
estimate of how changes in the unemployment rate affect the size
and growth of the underground economy in Australia and the likely
economic implications this may have for public policy decisions. We
find that a number of unemployed Australians prefer to remain unemployed
and work surreptitiously in the underground economy, while
others, after becoming unemployed and finding legitimate employment,
prefer to continue working in the underground economy.
