The Perverse Effect of Flexible Work Arrangements on Informality

Edoardo Di Porto (), Pietro Garibaldi (), Giovanni Mastrobuoni () and Paolo Naticchioni ()
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Pietro Garibaldi: Collegio Carlo Alberto, University of Torino, CEPR, and IZA
Giovanni Mastrobuoni: Collegio Carlo Alberto, University of Torino, CEPR, IZA, and RFBerlin
Paolo Naticchioni: Roma Tre University and IZA

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

Abstract: Work arrangements with no guaranteed working hours, which include casual work, are often promoted as a means to regularise informal labour. Utilising unique Italian administrative data that links employer-employee records, daily voucher usage by firms, and randomly timed labour inspections (2014-2017), we demonstrate that this type of Flexible Work Arrangements (FWA) can also hinder enforcement and increase undeclared work. We document that, upon inspection, some firms validate undeclared work with FWAs on the spot, raising the probability of FWA usage by 0.88 percentage points (18%) on average, with the largest increases occurring on the day of and the day after the inspection. A simple partial-equilibrium labour-demand model with heterogeneous tax morale rationalises these “on-the-spot” validations as an enforcement-avoidance margin. The post-inspection increase vanishes when firms are required to pre-notify the tax authority of their use of FWAs. Moreover, when FWAs are completely abolished, presumptive misusers substitute FWAs with temporary contracts.

Keywords: informality; labour vouchers; flexible work arrangements; occasional work; zero-hour contracts. (search for similar items in EconPapers)
JEL-codes: H26 J23 (search for similar items in EconPapers)
Date: 2026-07-04
New Economics Papers: this item is included in nep-iue
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Related works:
Working Paper: The Perverse Effect of Flexible Work Arrangements on Informality (2025)
Working Paper: The Perverse Effect of Flexible Work Arrangements on Informality (2022)
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