Unemployment and the shadow economy

Current research links the shadow economy (SE) and the unemployment rate either indirectly or by means of a preliminary estimate. This article establishes and empirically implements a methodology for estimating the size of the SE as a direct function of the tax and unemployment rates. This link is found to be extremely relevant in countries with high unemployment rates (such as Greece and Spain) and less relevant in countries with moderate unemployment rates (such as Germany and Italy). Unemployment’s contribution to the SE is shown to be significant, especially in the years following the economic downturn of 2008. The calculation of the variance and distribution of these estimates is another significant contribution. The common criticism that SE estimates are unreliable is addressed by calculating the variance and the distribution of the estimates, and the large size of the SE in Greece and Spain is once again confirmed.     

Exploring the dynamics of the shadow economy across US states

This article examines the dynamics of the shadow economy using data for 50 US states over the period 1998–2008. Using a panel VAR model, we analyse the impulse response of the shadow economy to an orthogonal shock in capital tax rates, educational attainment, union participation and gross state product. We find evidence of significant dynamics underlying the relationship between the shadow economy and its determinants. The results remain robust to alternate measures of the determinants of the shadow economy, alternate causal ordering of the variables in the system and conditioning on the level of income in each state.     

Tax reform in Georgia and the size of the shadow economy

This study applies three different methods widely used in the literature to track changes in shadow economic activity in Georgia following a drastic tax reform in 2005. The first method is a currency demand approach based on macrolevel data. The second and third methods rely on micro level data from household surveys. Overall, we find evidence that the amount of income underreporting decreased in the years following the reform. The biggest change is observed for households headed by a farmer, followed by ‘other’ types of households where the head does not report any working status. Employed and self‐employed households appear very similar before the tax reform and show minimal adjustment in income reporting in the post‐reform period. Results, however, suggest that much of any difference may have come from increased enforcement efforts rather than rate changes.     

The size and development of the shadow economy: An empirical investigation from states of India

Using the state level data from India, this paper investigates the size of the hidden economy in Indian states over the period 1974/75 to 1995/96. Our analysis has shown that after liberalization of the Indian economy in 1991/92, the growth in the size of the hidden economy has decreased on an average. Our results show that the growth in the size of the hidden economy is approximately 4% less in scheduled election years than in all other years. We also demonstrate that the growth is significantly lower in those states where the coalition government is in power. An increased growth of newspapers and the literacy rates translate to cleaner governance, e.g. to fewer amounts of shadow economy activities in the economy.     

The relationship between interest rate volatility and the shadow economy in OECD countries: An asymmetric analysis

Interest rate changes by central banks are a strong monetary policy tool that has a significant impact on the performance of the real economy via various channels. Despite extensive theoretical and empirical studies in this area, the current literature lacks a comprehensive assessment of the relationship between interest rate volatility and the shadow economy. This study explores the link between interest rate volatility and the shadow economy for 38 Organisation for Economic Co-operation and Development (OECD) member countries over the period 1991–2021 using both linear and non-linear ARDL models. The use of the non-linear ARDL specification will allow for the possibility of an asymmetric effect of interest rate volatility on the shadow economy. In addition to the examination of the potential asymmetric effects, we also discuss the ramifications for policymakers with respect to monetary and financial policies while considering each country's specific economic structure.     

工人离职、失业波动与失业保险文献评述

失业不仅涉及失业波动的影响,还包括在职工人的离队。为减少工人搜寻过程中产生的负外部性,应降低工人的信息成本。失业保险政策的实施又降低了失业工人再就业的激励性,应确立有效的失业保险水平,实现产出与社会福利的最大化。     

Sanctions and the shadow economy: empirical evidence from Iranian provinces

Using Iranian province level data from 2001 to 2013, this study finds that the international sanctions of 2012/2013 had a significantly stronger negative impact on the growth rate of the shadow economy than they did on the official GDP growth rate. Thus, the international sanctions on Iran have damaged the informal economy even more than the formal economy.     

Tax system and informal economy: a cross-country analysis

This article analyses determinants of informal economy. By using qualitative aspects of tax systems, first, we create a ‘Smithian’ tax system index based on Adam Smith’s four maxims. Then, using this index and other control variables, we study determinants of informal economy. We use unique panel data set that is constructed by using various sources. After taking into account the endogeneity of tax burden and GDP per capita, our results show that ‘Smithian’ tax system index does not significantly affect informal economy. Our results suggest that rule of law, complexity of a tax system and tax burden affect informal economy negatively, while labour market regulations affect positively.     

The Lure of Ill-Fitting Unemployment Statistics: How South Africa’s Discouraged Work Seekers Disappeared From the Unemployment Rate

ABSTRACT

Unemployment refuses unambiguous definition. Its statistical representation is always open to contestation, especially where labour markets differ from the Western-industrial norm. Why do countries adopt international standards even if they may fit local conditions poorly? South Africa is an exemplary case to answer this question. When Apartheid ended in the early 1990s, South African statisticians embraced the new emancipatory spirit. Their broad unemployment indicator defied international conventions but did justice to the marginalised Black population, and to Black women in particular. Since then, however, South Africa has fallen in line with the much narrower definition of the International Labour Organization (ILO), in spite of widespread criticism. Why? We find that ILO standards were not forced upon South Africa. Instead, South African statisticians themselves embraced international standards to repel charges of arbitrary or politically motivated numbers. Counterintuitively, international standards become alluring precisely when doubts about statistics’ fit with local conditions are the greatest.     

Unemployment durations of job losers in a labour market in transition

Slovakia is one of the Central European countries in transformation from a centralized command system to a decentralized market economy. This paper studies the labour market position of Slovak job losers. Using data from labour force surveys we analyse exit rates out of unemployment. We find that male, young, higher educated job losers in districts with low unemployment rates have substantially shorter unemployment durations than their counterparts. There is evidence that for some job losers it is very hard to find a new job.     

我国结构性失业的类型与对策

结构性失业逐渐成为我国失业问题的主要方面,研究结构性失业的类型有助于更好地解决我国的失业问题。我国结构性失业大体可以分为市场型结构性失业、制度型结构性失业和观念型结构性失业,前者又分为供给滞后型结构性失业、需求变动型结构性失业和机制不灵型结构性失业。根据不同的结构性失业类型,应采用有针对性的解决对策。     

Problems measuring the underground economy in transition1

An easy and popular method for measuring the size of the underground economy is to use macro data such as money demand or electricity demand to infer what the legitimate economy needs, and then to attribute the remaining consumption to the underground economy. Such inferences rely on the stability of parameters of the money demand and electricity demand equations, or at very least on knowledge of how these parameters are changing. We argue that the pace of change of these parameters is too variable in transition economies for the above methods of estimating the size of the underground economy to be applicable. We make our point by using Czech Republic and other transition country data from the financial and electricity sectors.     

Corporate labour share of income and the shadow economy: a cross-country analysis

This article addresses a link between the size of the shadow economy and the corporate labour share of income in the European Union. Fixed individual and time effects models suggest that there is a negative link between these two indicators. The coefficients are statistically significant if we control for other variables related to labour markets, such as unemployment rates or strictness of employment protection (regular contracts). Depending on the exact model specification, our estimates suggest that an increase in the shadow economy by 1% of GDP results in a 0.5–1% decline in the labour share of income in the corporate sector.     

The nexus of white collar crimes: shadow economy,corruption and uninsured motorists

This article empirically examines the nexus of three white collar crimes: shadow economy, corruption and uninsured motorists. Whereas the shadow economy–corruption linkage has been studied, the linkages with uninsured motorists have not been formally studied. Results, based on US data and accounting for possible bidirectional causalities, show complementarity between shadow economy and corruption and between uninsured motorists and the shadow economy. The magnitude of the impact of uninsured motorists on the shadow economy is greater than that of corruption. In other findings, shadow economy was lower in most prosperous states and in states that did not impose a sales tax.     

农业隐蔽失业模型的构建及其意义——基于劳动力数量和劳动时间双重的视角

基于劳动力数量和劳动时间双重视角构建隐蔽失业模型,分析农业劳动生产率和产出变化对各种隐蔽失业结构和数量产生的影响。结果显示:模型得出的结论与刘易斯理论一致,而与舒尔茨理论相反,政府可据此制定相关政策。     

Involuntary Unemployment: An Expository Note

This note is an effort to view the research program of Brecher and his co-workers to deploy tax incentives against involuntary unemployment in the broader context; on both the equity-efficiency trade-off in political economy, and the dual economic structure in the theoretic foundations of market equilibrium.     

The shadow economy in three Mediterranean countries: France,Spain and Greece. A MIMIC approach

This paper offers estimations of the evolution of the shadow economy in three Mediterranean countries, namely France, Spain and Greece. A multiple indicators and multiple causes model based on the latent variable structural theory has been applied. As established by Giles (Working paper on monitoring the health of the tax system, 1995), filtered data to solve the non-stationary problems are used. The model includes the tax burden (both as a whole and disaggregated into direct taxes, indirect taxes and social security contributions), a proxy of regulation burden, theu nemployment rate and self-employment as causes of the shadow economy and the GDP growth rate, the labour force participation ratio and the currency ratio as indicators of the underground economy. The results confirm that unemployment, the fiscal burden and self-employment are the main causes of the shadow economy in these countries, and confirm that an inverse relationship exists between the official GDP growth rate and that of the unofficial economy. This paper has benefited from the comments and suggestions of the anonymous referees. The usual disclaimer applies. The paper was partly written when third author was visiting Real Colegio Complutense at Harvard University. The hospitality of this Institution is gratefully acknowledged.     

The Glass Ceiling Puzzle,Legal Institutions,and the Shadow Economy

ABSTRACT

Scholarly studies in economics, sociology, psychology, and management emphasize the low number of women in management as one of the main indicators of gender discrimination in the labor market. This study investigates the differences in the percentage of women in senior management across forty-five countries. The results of the regression analysis show that women are more represented in senior management in developing countries than in so-called “liberal Western democracies.” Women also participate more in senior management in countries in which prejudice and discrimination against women are greater. The study presents empirical evidence for two economic explanations for these puzzling results: the weak functioning of the legal system and the large size of the shadow economy.     

Addiction,social interactions and gender differences in cigarette consumption

This paper addresses the impact of addiction and social interactions on cigarette demand, controlling for demographic and socioeconomic factors. A Box–Cox double-hurdle model for the simultaneous decisions of how much to smoke and whether to quit smoking is estimated on individual data from the 2000 Italian “Health Status and Use of Health Services” survey. The model incorporates the fixed costs of quitting and allows for the analysis of the effects of addiction and social interactions on smoking participation and cigarette consumption. Estimation results show that the duration of the smoking habit, used as measure of addiction, significantly increases the level of cigarette consumption and lowers the probability of quitting. Social interactions significantly affect individual’s attitude toward smoking. Finally, gender differences are formally tested to verify whether male and female sub-samples can be pooled or should be separately analyzed. The hypothesis of equal consumption parameters is clearly rejected, suggesting the opportunity of distinguishing the consumption patterns of men and women.