The Cyclical Behaviour of Shadow and Regular Employment
AbstractUsing the Hodrick-Prescott filter, this paper examines the cyclical properties of the Italian labour market. Its main contribution is the empirical analysis of three different labour inputs - regular employees, regular self-employed and underground workers. Results from VAR models support the widespread view that the shadow employment functions as an improper tool for increasing the flexibility of the labour market. While the contemporaneous correlation between shadow labour and output is significant, as time passes their association looses momentum. The opposite is found for regular employees, which show significant positive correlations only with lagged output gaps. Somewhat puzzling, self- employment seems to be the less sensitive to the course of business cycles. The skewness of input distributions suggests that hiring employees is easier than firing them, while this can not be said for the other two labour gaps. Disaggregate data tell different stories. For instance, in the manufacturing sector the hidden employment is not correlated with the output, while in the trade sector the acyclical input turns out to be the recorded employees. In the transport industry, where no labour input follow the cycle, regular employees are more fired than hired.
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Bibliographic InfoPaper provided by EconWPA in its series Labor and Demography with number 0507011.
Date of creation: 28 Jul 2005
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Underground economy; VAR models; Labour Flexibility; Business Cycle.;
Other versions of this item:
- Maurizio Bovi, 2006. "The Cyclical Behavior of Shadow and Regular Employment," ISAE Working Papers 62, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-08-13 (All new papers)
- NEP-DGE-2005-08-13 (Dynamic General Equilibrium)
- NEP-ENT-2005-08-13 (Entrepreneurship)
- NEP-LAB-2005-08-13 (Labour Economics)
- NEP-PBE-2005-08-13 (Public Economics)
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