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Shadow employment in post-transition--Is informal employment a matter of choice or no choice in Poland?

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  • Cichocki, Stanislaw
  • Tyrowicz, Joanna

Abstract

According to a dualistic view, shadow employment may follow from two main labour market failures: (i) official market labour taxation distortions make it ineffective for some agents to engage in registered employment due to a tax wedge; or (ii) for some workers regular employment may be unattainable do to some high access costs or demand constraints, which results in seeking earning opportunities beyond the boundaries of the official labour market. Whereas in the first case revenues from unofficial employment should be higher than the corresponding official ones (tax evasion hypothesis), in the alternative explanation labour market tightness seems to be an underlying reason (market segmentation hypothesis). We use a unique data set from a survey on undeclared employment from Poland. Using propensity score matching and decomposition techniques we demonstrate that workers of shadow economy are characterised by slightly higher endowments, while their revenues are considerably lower than among matched official economy counterparts. Although unobservable heterogeneity is considerable, results are robust. Although this is not direct evidence, we believe these results point to the labour market segmentation hypothesis and endangerment with social exclusion.

Suggested Citation

  • Cichocki, Stanislaw & Tyrowicz, Joanna, 2010. "Shadow employment in post-transition--Is informal employment a matter of choice or no choice in Poland?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(4), pages 527-535, August.
  • Handle: RePEc:eee:soceco:v:39:y:2010:i:4:p:527-535
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Joanna TYROWICZ & Piotr W�JCIK, 2009. "Some Remarks On The Effects Of Active Labour Market Policies In Post-Transition," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(2(8)_ Sum).
    2. repec:ris:utmsje:0206 is not listed on IDEAS
    3. Novkovska, Blagica, 2016. "How Strongly The Hidden Economy Of A Small Country Can Be Influenced By Drastic Events: Case Of Macedonia," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 7(2), pages 187-195.
    4. Peter Elek & Janos Kollo, 2016. "Eliciting permanent and transitory undeclared work from matched administrative and survey data," Budapest Working Papers on the Labour Market 1605, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

    More about this item

    Keywords

    Undeclared employment Propensity score matching Oaxaca-Blinder decomposition Transition;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • P37 - Economic Systems - - Socialist Institutions and Their Transitions - - - Legal

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