Explaining participation in undeclared work in France: lessons for policy evaluation

Purpose - France is as a model of best-practice in the European Union as regards policy to combat undeclared work. This paper takes the country as a case study with which to evaluate the competing explanations of why people engage in undeclared work which underpin such policy: namely, the dominant rational-economic actor approach and the more recent socialactor approach.

Methodology - To evaluate these approaches, the results of 1,027 interviews undertaken in 2013 with a representative sample of the French population are analysed.

Findings - The finding is that higher perceived penalties and risks of detection have no significant impact on the likelihood of conducting undeclared work in France. In contrast, the level of tax morale has a significant impact on engagement in the activity: the higher the tax morale, the lower is the likelihood of participation in the undeclared economy. Higher penalties and risks of detection only decrease the likelihood of participation in undeclared work amongst the small minority of the French population with very low tax morale.

Practical Implications - Current policy in France to counter undeclared work is informed principally by the rational economic actor approach based on a highly-developed infrastructure for detection and significant penalties alongside incentives to declare small-scale own-account work. The present analysis suggests that this approach needs to be supplemented with measures to improve citizens’ commitment to compliance by enhancing tax morale.

Originality/value - This case study of a country with a well-developed policy framework to combat undeclared work provides evidence to support the social-actor approach to informing policy change.