Shadow Employment and Labor Productivity Dynamics

Maurizio Bovi ()

LABOUR, 2007, vol. 21, issue 4-5, pages 735-761

Abstract: This paper offers theoretical and empirical insights on the anecdotal 'buffer hypothesis', i.e. the view that the shadow employment functions as an improper tool for increasing the labor market flexibility. Official data for Italy support the premise. Although the contemporaneous correlation between Hodrick-Prescott-detrended shadow labor and output is positive and significant, as time passes their association looses momentum. The opposite is found for the regular employees. Because of their lower productivity level, the cyclical response of the hidden workers affects the short-term profile of the overall labor productivity. It adds new hints on the still puzzling 1990s productivity dynamics. Copyright 2007 The Author. Journal compilation CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd. 2007.

Date: 2007
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