The Cyclical Behaviour of Shadow and Regular Employment

Maurizio Bovi (mbovi@istat.it)

Labor and Demography from University Library of Munich, Germany

Abstract: Using the Hodrick-Prescott filter, this paper examines the cyclical properties of the Italian labour market. Its main contribution is the empirical analysis of three different labour inputs - regular employees, regular self-employed and underground workers. Results from VAR models support the widespread view that the shadow employment functions as an improper tool for increasing the flexibility of the labour market. While the contemporaneous correlation between shadow labour and output is significant, as time passes their association looses momentum. The opposite is found for regular employees, which show significant positive correlations only with lagged output gaps. Somewhat puzzling, self- employment seems to be the less sensitive to the course of business cycles. The skewness of input distributions suggests that hiring employees is easier than firing them, while this can not be said for the other two labour gaps. Disaggregate data tell different stories. For instance, in the manufacturing sector the hidden employment is not correlated with the output, while in the trade sector the acyclical input turns out to be the recorded employees. In the transport industry, where no labour input follow the cycle, regular employees are more fired than hired.

Keywords: Underground economy; VAR models; Labour Flexibility, Business Cycle. (search for similar items in EconPapers)
JEL-codes: C32 C53 H26 J30 (search for similar items in EconPapers)
Date: 2005-07-28
New Economics Papers: this item is included in nep-dge, nep-ent, nep-lab and nep-pbe
Note: Type of Document - pdf
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Related works:
Working Paper: The Cyclical Behavior of Shadow and Regular Employment (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpla:0507011

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