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Interrelationships of the hidden economy and some visible segments of the labour market

  • Maria Lacko

    ()

    (Institute of Economics Hungarian Academy of Sciences)

Since there are no broadly accepted macro-level estimations for the size of the hidden economy, the interrelationships of the hidden economy with different segments of the labor market have to be approached in a number of different ways. In our cross-country analysis, in parts 2 and 3 we use indirect estimations of the hidden economy and show that the size of the hidden economy and the size of self-employment can be explained by similar explanatory variables, tax rates and corruption being prominent among them. In part 4 we set up and quantify a model to analyze the interrelationships among the hidden economy and the pools of self-employed and non-employed people. For this model we use a specific direct indicator of the hidden economy, the concealed consumption share which is derived from the notion of the non-observed economy used by statistical agencies. We show that the size of this part of the hidden economy is determined by the tax rate related to the consumption and the level of corruption. We also demonstrate that the concealed consumption share plays an important role in the determination of the size of various segments of the labor market, while the developments of these segments also have their impact on this specific part of the hidden economy.

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Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0707.

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Length: 48 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:has:discpr:0707
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  1. Axel Dreher & Friedrich Schneider, 2006. "Corruption and the Shadow Economy: An Empirical Analysis," KOF Working papers 06-123, KOF Swiss Economic Institute, ETH Zurich.
  2. Francesco Daveri & Guido Tabellini, . "Unemployment, Growth and Taxation in Industrial Countries," Working Papers 122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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  8. Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-92, May.
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  10. Choi, Jay Pil & Thum, Marcel, 2003. "Corruption and the shadow economy," Dresden Discussion Paper Series in Economics 02/03, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  11. Martin T. Robson & Colin Wren, 1999. "Marginal and Average Tax Rates and the Incentive for Self-Employment," Southern Economic Journal, Southern Economic Association, vol. 65(4), pages 757-773, April.
  12. Simon Johnson & Daniel Kaufmann & Andrei Shleifer, 1997. "Politics and Entrepreneurship in Transition Economies," William Davidson Institute Working Papers Series 57, William Davidson Institute at the University of Michigan.
  13. Edward Christie & Mario Holzner, 2006. "What Explains Tax Evasion? An Empirical Assessment based on European Data," wiiw Working Papers 40, The Vienna Institute for International Economic Studies, wiiw.
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