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The Cyclical Behavior of Shadow and Regular Employment

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Author Info
Maurizio Bovi (ISAE - Institute for Studies and Economic Analyses)

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Abstract

Using data from the Italian Institute of Statistics, I examine the cyclical properties of three labor inputs - regular employees, regular self-employed, and underground workers. Results support the widespread view that, in Italy, the shadow employment functions as an improper tool for increasing the labor market flexibility. My analysis uncovers more details. While the contemporaneous correlation between shadow labor and output is significant, as time passes their association looses momentum. The opposite is found for regular employees, which show significant positive correlations with lagged output gaps only. Somewhat puzzling, self-employment seems to be the less sensitive to the course of business cycles. Possibly, hidden employment substitutes it as shock-absorber. Sectoral data tell different stories.

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Publisher Info
Paper provided by ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY) in its series ISAE Working Papers with number 62.

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Length: 44 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:isa:wpaper:62

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Related research
Keywords: Underground economy; VAR models; Labor Market Flexibility; Business Cycle;

Other versions of this item:

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications
E26 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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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. Maurizio Bovi, 2005. "The Dark, and Independent, Side of the Italian Labour Market," Labor and Demography 0504003, EconWPA. [Downloadable!]
    Other versions:
  2. Ravn, Morten O. & Uhlig, Harald, 2001. "On Adjusting the HP-Filter for the Frequency of Observations," CEPR Discussion Papers 2858, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Francesco Busato & Bruno Chiarini, 2004. "Market and underground activities in a two-sector dynamic equilibrium model," Economic Theory, Springer, vol. 23(4), pages 831-861, May. [Downloadable!] (restricted)
  4. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD, Economics Department. [Downloadable!]
  5. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November. [Downloadable!] (restricted)
    Other versions:
  6. Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band pass filter," Working Paper 9906, Federal Reserve Bank of Cleveland. [Downloadable!]
    Other versions:
    • Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band Pass Filter," NBER Working Papers 7257, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    • Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, 05. [Downloadable!] (restricted)
  7. Ihrig, Jane & Moe, Karine S., 2004. "Lurking in the shadows: the informal sector and government policy," Journal of Development Economics, Elsevier, vol. 73(2), pages 541-557, April. [Downloadable!] (restricted)
  8. Giles, David E A, 1997. "Causality between the Measured and Underground Economies in New Zealand," Applied Economics Letters, Taylor and Francis Journals, vol. 4(1), pages 63-67, January. [Downloadable!] (restricted)
  9. Giuseppe Bertola & Pietro Garibaldi, 2003. "The Structure and History of Italian Unemployment," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  10. 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:
  11. Boeri, Tito & Garibaldi, Pietro, 2002. "Shadow Activity and Unemployment in a Depressed Labour Market," CEPR Discussion Papers 3433, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  12. Carillo, Maria Rosaria & Pugno, Maurizio, 2004. "The underground economy and underdevelopment," Economic Systems, Elsevier, vol. 28(3), pages 257-279, September. [Downloadable!] (restricted)
  13. Friedrich Schneider & Dominik H. Enste, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March. [Downloadable!] (restricted)
  14. Fugazza, Marco & Jacques, Jean-Francois, 2004. "Labor market institutions, taxation and the underground economy," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 395-418, January. [Downloadable!] (restricted)
  15. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September. [Downloadable!] (restricted)
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