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Interaction between Underground Employment and Unions in selected Italian industries


  • Bruno Chiarini
  • Elisabetta Marzano

    () (Department of Economic Studies, Parthenope University of Naples)


In this paper we investigate empirically the nature of the relation between underground employment and unions in Italy, focusing on certain productive sectors. The motivation for this analysis is the hypothesis of the existence of two different opposite channels through which unions affect underground employment: a macro-effect, generating shadow activities via higher wages and market rigidities; a micro-effect, entailing a negative impact of trade union power on underground employment. We consider two different measures of the bargaining power of trade unions, i.e. wages and net density. Econometric analysis of Italian data yields three main results. First, mechanisms of interaction between underground employment and unions change profoundly according to the nature of the industry. Second, the two indexes of the trade unions’ bargaining power play a different role vis-à-vis the extent of underground employment. Third, there is a counter-intuitive interaction between wage and underground employment, which may be explained in an insider-outsider framework.
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  • Bruno Chiarini & Elisabetta Marzano, 2008. "Interaction between Underground Employment and Unions in selected Italian industries," Working Papers 6_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  • Handle: RePEc:prt:wpaper:6_2008

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    1. Elisabetta Marzano, 2004. "Dual Labour Market Theories And Irregular Jobs: Is There a Dualism Even in The Irregular Sector?," CELPE Discussion Papers 81, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
    2. Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 129-162, December.
    3. Lawrence, Sophia. & Ishikawa, Junko., 2005. "Trade union membership and collective bargaining coverage : statistical concepts, methods and findings," ILO Working Papers 994858633402676, International Labour Organization.
    4. Maurizio Bovi, 2007. "Shadow Employment and Labor Productivity Dynamics," LABOUR, CEIS, vol. 21(4-5), pages 735-761, December.
    5. Fugazza, Marco & Jacques, Jean-Francois, 2004. "Labor market institutions, taxation and the underground economy," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 395-418, January.
    6. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    7. Kolm, Ann-Sofie & Larsen, Birthe, 2001. "Wages, Unemployment, and the Underground Economy," Working Paper Series 2001:8, Uppsala University, Department of Economics.
    8. 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.
    9. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    10. Busato, Francesco & Chiarini, Bruno & Rey, Guido M., 2012. "Equilibrium implications of fiscal policy with tax evasion: A long run perspective," International Review of Law and Economics, Elsevier, vol. 32(2), pages 197-214.
    11. Kidd, David P & Oswald, Andrew J, 1987. "A Dynamic Model of Trade Union Behaviour," Economica, London School of Economics and Political Science, vol. 54(215), pages 355-365, August.
    12. Tito Boeri & Pietro Garibaldi, "undated". "Shadow Activity and Unemployment in a Depressed Labor Market," Working Papers 177, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    13. Chiarini Bruno & Marchetti Enrico, 2000. "Modelli dinamici del sindacato: estensioni e critiche," Economia politica, Società editrice il Mulino, issue 1, pages 113-148.
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