Estimating Labor Demand Function in the Presence of Undeclared Labour: A Look Behind the Curtain

Edoardo Di Porto and Leandro Elia

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: This paper presents estimates of the own-wage elasticity for undeclared labour demand and calculates the effects of undeclared work on declared wages of various skill levels. To identify the parameters of interest, we exploit a quasiexperimental setting created by three tax amnesty laws brought brought into force in 2002 in Italy. Our main results indicate that an upward shift in undeclared work decreases undeclared wages, increases declared wages, and reduces wage inequality in the declared sector. We find q-complementarity between undeclared workers and low to medium-skilled workers.

Date: 2015-02-17
New Economics Papers: this item is included in nep-iue and nep-lab
Note: A previous version of this paper circulated with the title "Undeclared Work and Wage Inequality"
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:389

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