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Informal workers across Europe : evidence from 30 European countries

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  • Hazans, Mihails

Abstract

The European Social Survey data are used to analyze informal employment in 30 countries, focusing on employees without contracts and on informal self-employed workers (who are distinguished from formal workers). Overall the size of informal employment decreases from South to West to East to North. However, working without a contract is more prevalent in Eastern Europe than in the West, except for Ireland, the United Kingdom, and Austria. Between 2004 and 2009, no cases were found when unemployment and dependent informality rates in a country went up together, suggesting that working without a contract is pro-cyclical in Europe. The dependent informality rate is inversely related to skills (measured by either schooling or occupation). Both in Southern and in Western Europe, the highest dependent informality rate is found among immigrants from Central and Eastern Europe and the Former Soviet Union, while in Eastern Europe this group is second after minorities without immigrant background. In the Southern and part of Western Europe, immigrants not covered by European Union free mobility provisions are much more likely to work without a contract than otherwise similar natives. The paper provides evidence that exclusion and discrimination plays an important role in pushing employees into informality, while this seems not to be the case for informal self-employed workers. Both on average and after controlling for a rich set of individual characteristics, informal employees in all parts of Europe are having the largest financial difficulties among all categories of the employed population (yet they fare much better than the unemployed and discouraged), while informal self-employed workers are at least as well off as formal employees. Finally, there is a negative and significant effect of individual-level satisfaction with the national government on the propensity to work without a contract in Eastern Europe, as well as in Western Europe.

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  • Hazans, Mihails, 2011. "Informal workers across Europe : evidence from 30 European countries," Policy Research Working Paper Series 5912, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5912
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    References listed on IDEAS

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    Cited by:

    1. Cristina Fernández & Leonardo Villar, 2016. "A Taxonomy of Colombia’s Informal Labor Market," COYUNTURA ECONÓMICA, FEDESARROLLO, vol. 46(1), pages 15-50, June.
    2. Rodrigo Ceni, 2014. "Social security schemes and labor supply in the formal and informal sectors," Documentos de Trabajo (working papers) 14-12, Instituto de Economía - IECON.
    3. Schneider, Friedrich, 2014. "The Shadow Economy and Shadow Labor Force: A Survey of Recent Developments," IZA Discussion Papers 8278, Institute for the Study of Labor (IZA).
    4. B. Contini & J. Ignacio Garcia Perez & T. Pusch & R. Quaranta, 2017. "New Approaches to the Study of Long Term Non-Employment Duration in Italy, Germany and Spain," Working Papers 2017-14, FEDEA.
    5. Michael Weber, 2015. "Measuring disincentives to formal work," IZA World of Labor, Institute for the Study of Labor (IZA), pages 213-213, December.
    6. Alexandru Cojocaru, 2017. "Kosovo Jobs Diagnostic," World Bank Other Operational Studies 27173, The World Bank.
    7. Johannes Koettl & Truman Packard & Claudio E. Montenegro, 2012. "In From the Shadow : Integrating Europe's Informal Labor," World Bank Publications, The World Bank, number 9377.
    8. Schneider, Friedrich, 2012. "The Shadow Economy and Work in the Shadow: What Do We (Not) Know?," IZA Discussion Papers 6423, Institute for the Study of Labor (IZA).
    9. Amélie Barbier-Gauchard & Francesco de Palma & Giuseppe Diana, 2013. "Why could Northern labor market flexibility save the eurozone?," Working Papers of LaRGE Research Center 2013-08, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    10. 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).
    11. Altay Mussurov & G Arabsheibani, 2015. "Informal self-employment in Kazakhstan," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-19, December.
    12. 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.
    13. Barbier-Gauchard, Amélie & De Palma, Francesco & Diana, Giuseppe, 2014. "Why should Southern economies stay in the Euro Zone? The role of labor markets," Economic Modelling, Elsevier, vol. 43(C), pages 201-208.
    14. Kureková, Lucia Mýtna & Žilinčíková, Zuzana, 2015. "Low-Skilled Jobs and Student Jobs: Employers' Preferences in Slovakia and the Czech Republic," IZA Discussion Papers 9145, Institute for the Study of Labor (IZA).
    15. Koettl, Johannes & Weber, Michael, 2012. "Does Formal Work Pay? The Role of Labor Taxation and Social Benefit Design in the New EU Member States," IZA Discussion Papers 6313, Institute for the Study of Labor (IZA).
    16. Hazans, Mihails, 2011. "Informal Workers across Europe: Evidence from 30 Countries," IZA Discussion Papers 5871, Institute for the Study of Labor (IZA).
    17. Friedrich Schneider, 2013. "Work in the Shadow: Some Facts," Economics working papers 2013-18, Department of Economics, Johannes Kepler University Linz, Austria.
    18. Amélie Barbier-Gauchard & Francesco De Palma & Giuseppe Diana, 2012. "Currency devaluation with dual labor market : Which perspectives for the Euro Zone ?," Working Papers of BETA 2012-04, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
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    20. World Bank, 2013. "From Double-Dip Recession to Fragile Recovery," World Bank Other Operational Studies 16559, The World Bank.

    More about this item

    Keywords

    Labor Markets; Work&Working Conditions; Labor Policies; Labor Management and Relations; Tertiary Education;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • 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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