Labor Institutions and Their Impact on Shadow Economies in Europe

Fialova, Kamila ; Schneider, Ondrej

关键词: ACCESS TO CAPITAL;    ACTIVE LABOR;    ACTIVE LABOR MARKET;    ACTIVE LABOR MARKET POLICY;    ADJUSTMENT COSTS;   

DOI  :  10.1596/1813-9450-5913
RP-ID  :  WPS5913

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper analyzes the role of labormarket institutions in explaining the development of shadoweconomies in European countries. The analysis uses severalalternative measures of the shadow sector, and examines theeffects of labor institutions on the shadow sector in twospecific regions: new and old European Union membercountries, as their respective shadow sectors exhibited adifferent development in the past decade. Although the shareof the shadow economy in gross domestic product averaged27.5 percent in the new member countries in 1999-2007, therespective share in the old member states stood at 17.9percent. The paper estimates the effects of labor marketinstitutions on two sets of shadow economy indicators --shadow production and shadow employment. Comparingalternative measures of the shadow sector allows a moregranulated analysis of labor market institution effects. Theresults indicate that the one institution that unambiguouslyincreases shadow economy production and employment is thestrictness of employment protection legislation. Other labormarket institutions -- active and passive labor marketpolicies, labor taxation, trade union density, and theminimum wage setting -- have less straightforward andstatistically robust effects and their impacts often divergein new and old European Union member countries. Thedifferences are not robust enough, however, to allow forrejecting the hypothesis of similar effects of labor marketinstitutions in new and old European Union member states.