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The Cyclical Behavior of Shadow and Regular Employment

Author

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  • Maurizio Bovi

    (ISAE - Institute for Studies and Economic Analyses)

Abstract

Using data from the Italian Institute of Statistics, I examine the cyclical properties of three labor inputs - regular employees, regular self-employed, and underground workers. Results support the widespread view that, in Italy, the shadow employment functions as an improper tool for increasing the labor market flexibility. My analysis uncovers more details. While the contemporaneous correlation between shadow labor and output is significant, as time passes their association looses momentum. The opposite is found for regular employees, which show significant positive correlations with lagged output gaps only. Somewhat puzzling, self-employment seems to be the less sensitive to the course of business cycles. Possibly, hidden employment substitutes it as shock-absorber. Sectoral data tell different stories.

Suggested Citation

  • Maurizio Bovi, 2006. "The Cyclical Behavior of Shadow and Regular Employment," ISAE Working Papers 62, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  • Handle: RePEc:isa:wpaper:62
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    References listed on IDEAS

    as
    1. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
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    3. David Giles, 1997. "Causality between the measured and underground economies in New Zealand," Applied Economics Letters, Taylor & Francis Journals, vol. 4(1), pages 63-67.
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    6. Carillo, Maria Rosaria & Pugno, Maurizio, 2004. "The underground economy and underdevelopment," Economic Systems, Elsevier, vol. 28(3), pages 257-279, September.
    7. Maurizio Bovi, 2005. "The Dark, and Independent, Side of the Italian Labour Market," LABOUR, CEIS, vol. 19(4), pages 721-748, December.
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    9. Francesco Busato & Bruno Chiarini, 2004. "Market and underground activities in a two-sector dynamic equilibrium model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 23(4), pages 831-861, May.
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    Citations

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    Cited by:

    1. Joanna Tyrowicz & Stanisław Cichocki, 2011. "Employed unemployed? On shadow employment in transition," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 38(2), pages 259-281, May.
    2. Joanna Tyrowicz & Stanisław Cichocki, 2010. "Employed Unemployed? On Shadow Employment During Transition," Working Papers 2010-05, Faculty of Economic Sciences, University of Warsaw.

    More about this item

    Keywords

    Underground economy; VAR models; Labor Market Flexibility; Business Cycle;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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