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Labor Market Institutions and Their Impact on Shadow Economies in Europe

Author

Listed:
  • Kamila Fialová
  • Ondrej Schneider

Abstract

This paper analyzes the role of labor market institutions in explaining developments of shadow economies in European countries. We use several alternative measures of the shadow sector to examine the effects of labor market institutions on shadow sector in two specific regions, the old and the new European Union member states. Comparing alternative measures of the shadow sector allows a more granulated analysis of the effects of labor market institutions. Our results indicate that the one institution that unambiguously increases shadow economy is the strictness of employment protection legislation. Other labor market institutions have less straightforward and statistically robust effects, and their impact often differs in the old and new EU member states.

Suggested Citation

  • Kamila Fialová & Ondrej Schneider, 2014. "Labor Market Institutions and Their Impact on Shadow Economies in Europe," Review of Economics and Institutions, Università di Perugia, vol. 5(1).
  • Handle: RePEc:pia:review:v:5:y:2014:i:1:n:3
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. On Black Money, Corruption, and Demonetization
      by paragwaknis in Musings of the Sorts on 2016-12-29 09:03:07

    Citations

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    Cited by:

    1. Davidescu, Adriana Anamaria & Schneider, Friedrich, 2017. "Nature of the Relationship between Minimum Wage and the Shadow Economy Size: An Empirical Analysis for the Case of Romania," IZA Discussion Papers 11247, Institute for the Study of Labor (IZA).
    2. Hazans, Mihails, 2011. "What Explains Prevalence of Informal Employment in European Countries: The Role of Labor Institutions, Governance, Immigrants, and Growth," IZA Discussion Papers 5872, Institute for the Study of Labor (IZA).
    3. World Bank, 2011. "Employment Protection Legislation and Labor Market Outcomes : Theory, Evidence and Lessons for Croatia," World Bank Other Operational Studies 12902, The World Bank.
    4. Ioana M. PETRESCU, 2016. "The Effects of Economic Sanctions on the Informal Economy," Management Dynamics in the Knowledge Economy Journal, College of Management, National University of Political Studies and Public Administration, vol. 4(4), pages 623-648, December.
    5. Indermit Gill & Johannes Koettl & Truman Packard, 2013. "Full employment: a distant dream for Europe," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-34, December.
    6. Roberta Gatti & Diego F. Angel-Urdinola & Joana Silva & Andras Bodor, 2014. "Striving for Better Jobs : The Challenge of Informality in the Middle East and North Africa," World Bank Publications, The World Bank, number 19905, July.
    7. Hazans, Mihails, 2011. "Informal Workers across Europe: Evidence from 30 Countries," IZA Discussion Papers 5871, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    labor market institutions; shadow economy; shadow employment; European Union;

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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