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Eliciting Permanent and Transitory Undeclared Work from Matched Administrative and Survey Data

Author

Listed:
  • Elek, Peter

    () (Eötvös Lorand University)

  • Köll?, János

    () (Hungarian Academy of Sciences)

Abstract

We study the undeclared work patterns of Hungarian employees in relatively stable jobs, using a panel dataset that matches individual-level self-reported Labour Force Survey data with administrative records of the Pension Directorate for 2001–2006. We estimate the determinants of undeclared work using Heckman-type random-effects panel probit models, and develop a two-regime model to separate permanent and transitory undeclared work, where the latter follows a Markov chain. We find that about 6-7 per cent of workers went permanently unreported for six consecutive years, and a further 4 per cent were transitorily unreported in any given year. The models show lower reporting rates – especially in the permanent segment – among males, high-school graduates, those in agriculture and transport, various forms of atypical employment, and small firms. Transitory non-reporting may be partly explained by administrative records missing for technical reasons. The results suggest that (i) the 'aggregate labour input method' widely used in Europe can indeed be a simple yet reliable tool to estimate the size of informal employment, although it slightly overestimates the true magnitude of black work (ii) the long-term pension consequences of undeclared work are substantial because of the high share of permanent non-reporting.

Suggested Citation

  • Elek, Peter & Köll?, János, 2017. "Eliciting Permanent and Transitory Undeclared Work from Matched Administrative and Survey Data," IZA Discussion Papers 10800, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp10800
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    References listed on IDEAS

    as
    1. Elek, Peter & Köll?, János & Reizer, Balázs & Szabó, Péter A., 2011. "Detecting Wage Under-reporting Using a Double Hurdle Model," IZA Discussion Papers 6224, Institute for the Study of Labor (IZA).
    2. Massimo Baldini & Paolo Bosi & Michele Lalla, 2009. "Tax evasion and misreporting in income tax returns and household income surveys," Politica economica, Società editrice il Mulino, issue 3, pages 333-348.
    3. Jaanika Meriküll & Karsten Staehr, 2010. "Unreported Employment and Envelope Wages in Mid-Transition: Comparing Developments and Causes in the Baltic Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 52(4), pages 637-670, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    random-effects panel probit with endogenous selection; matched administrative-survey data; labour input method; undeclared work; Markov chain;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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