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Interrelationships of the hidden economy and some visible segments of the labour market

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Author Info
Maria Lacko () (Institute of Economics Hungarian Academy of Sciences)

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Abstract

Since there are no broadly accepted macro-level estimations for the size of the hidden economy, the interrelationships of the hidden economy with different segments of the labor market have to be approached in a number of different ways. In our cross-country analysis, in parts 2 and 3 we use indirect estimations of the hidden economy and show that the size of the hidden economy and the size of self-employment can be explained by similar explanatory variables, tax rates and corruption being prominent among them. In part 4 we set up and quantify a model to analyze the interrelationships among the hidden economy and the pools of self-employed and non-employed people. For this model we use a specific direct indicator of the hidden economy, the concealed consumption share which is derived from the notion of the non-observed economy used by statistical agencies. We show that the size of this part of the hidden economy is determined by the tax rate related to the consumption and the level of corruption. We also demonstrate that the concealed consumption share plays an important role in the determination of the size of various segments of the labor market, while the developments of these segments also have their impact on this specific part of the hidden economy.

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Publisher Info
Paper provided by Institute of Economics, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0707.

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Length: 48 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:has:discpr:0707

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Related research
Keywords: Hidden economy; labor market; taxation; corruption;

Find related papers by JEL classification:
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
J2 - Labor and Demographic Economics - - Demand and Supply of Labor
E26 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Edward Christie & Mario Holzner, 2006. "What Explains Tax Evasion? An Empirical Assessment based on European Data," Working Papers 40, The Vienna Institute for International Economic Studies, wiiw. [Downloadable!]
  2. Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-92, May. [Downloadable!] (restricted)
  3. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR, CES, MSH, vol. 15(30), pages 47-104, 04. [Downloadable!] (restricted)
    Other versions:
  4. Martin T. Robson & Colin Wren, 1999. "Marginal and Average Tax Rates and the Incentive for Self-Employment," Southern Economic Journal, Southern Economic Association, vol. 65(4), pages 757-773, April.
  5. Murat F. Iyigun & Ann L. Owen, 1997. "Risk, entrepreneurship and human capital accumulation," Finance and Economics Discussion Series 1997-37, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  6. Axel Dreher & Friedrich Schneider, 2006. "Corruption and the Shadow Economy: An Empirical Analysis," IZA Discussion Papers 1936, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  7. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Tito Boeri & Pietro Garibaldi, . "Shadow Activity and Unemployment in a Depressed Labor Market," Working Papers 177, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
    Other versions:
  9. Jay Pil Choi & Marcel Thum, 2002. "Corruption and the Shadow Economy," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  10. Spicer, M W & Lundstedt, S B, 1976. "Understanding Tax Evasion," Public Finance = Finances publiques, , vol. 31(2), pages 295-305.
  11. Simon Johnson & Daniel Kaufmann & Andrei Shleifer, 1997. "Politics and Entrepreneurship in Transition Economies," William Davidson Institute Working Papers Series 57, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  12. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, 01. [Downloadable!] (restricted)
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