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Social capital and undeclared work: an empirical analysis in Italy from 1998 to 2008

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  • Maria Felice Arezzo

    ()
    (Department of Methods and Models for Economics, Territory and Finance MEMOTEF, Sapienza University of Rome (Italy))

Abstract

The issue of irregular work has been well known in Italy since the early seventies. Undeclared work is a particular facet of shadow economy where employers evade tax typically by underreporting either the numbers of workers or the hours worked or both and, by this mean, they avoid paying the legally due social security contributions. As any form of shadow activity, undeclared work introduces important biases in the economic system. That is why, it is of paramount interest for policy makers to understand which are the factors influencing undeclared work. The Italian National Institute of Statistics has developed a methodology in the vanguard to estimate the rate of irregular work and today we have time series long enough for a review of the phenomenon. When looking at regional rates of irregular work it’s stunning how dissimilar they are and this dissimilarity is kept over time. This paper aims to understand the reasons of this heterogeneous dynamics and to identify it’s determinants, focusing in particular on the role of social capital. We use a dynamic panel model to measure the impact of social capital and of some other relevant variables on regional irregular work rates. We find that social capital ha a significant effect. It reveals itself to be a key factor in hindering the use of irregular workers.

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File URL: http://www.memotef.uniroma1.it/sites/dipartimento/files/wpapers/documenti/FullTextWP112.pdf
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Paper provided by Sapienza University of Rome, Metodi e modelli per l'economia, il territorio e la finanza MEMOTEF in its series Working Papers with number 112/13.

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Handle: RePEc:rsq:wpaper:16/13

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Keywords: Social capital; Undeclared work; Arellano-Bond estimator; Dynamic.;

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  1. Benno Torgler, 2003. "Tax Morale in Asian Countries," Working papers 2003/04, Faculty of Business and Economics - University of Basel.
  2. Alesina, Alberto & Giuliano, Paola, 2007. "The Power of the Family," IZA Discussion Papers 2750, Institute for the Study of Labor (IZA).
  3. David Roodman, 2006. "How to Do xtabond2: An Introduction to "Difference" and "System" GMM in Stata," Working Papers 103, Center for Global Development.
  4. Alberto Alesina & Paola Giuliano, 2011. "Family Ties And Political Participation," Journal of the European Economic Association, European Economic Association, vol. 9(5), pages 817-839, October.
  5. Maurizio Bovi & Laura Castellucci, 2001. "Cosa sappiamo dell'economia sommersa in Italia al di là dei luoghi comuni? Alcune proposizioni empiricamente fondate," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2001(6).
  6. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
  7. Benno Torgler & James Alm & Jorge Martinez-Vazquez, 2005. "Russian Attitudes Toward Paying Taxes – Before, During, and After the Transition," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0518, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  8. Benno Torgler, 2005. "Tax morale in Latin America," Public Choice, Springer, vol. 122(1), pages 133-157, January.
  9. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
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