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Eliciting permanent and transitory undeclared work from matched administrative and survey data

Péter Elek () and János Köllő ()
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Péter Elek: Eötvös Loránd University (ELTE)
János Köllő: Hungarian Academy of Sciences (MTA KRTK)

Empirica, 2019, vol. 46, issue 3, 547-576

Abstract: Abstract We study the undeclared work patterns of Hungarian employees in relatively stable jobs, using a panel dataset that matches individual-level self-reported Labour Force Survey data with administrative records of the Pension Directorate for 2001–2006. We estimate the determinants of undeclared work using Heckman-type random-effects panel probit models, and develop a two-regime model to separate permanent and transitory undeclared work, where the latter follows a Markov chain. We find that about 6–7% of workers went permanently unreported for six consecutive years, and a further 4% were transitorily unreported in any given year. The models show lower reporting rates—especially in the permanent segment—among males, high-school graduates, those in agriculture and transport, small firms and various forms of atypical employment. Transitory non-reporting may be partly explained by administrative records missing for technical reasons. The results suggest that (1) the “aggregate labour input method” widely used in Europe can indeed be a simple yet reliable tool to estimate the size of informal employment, although it slightly overestimates the true magnitude of black work and (2) the long-term pension consequences of undeclared work may be substantial because of the high share of permanent non-reporting.

Keywords: Undeclared work; Labour input method; Matched administrative-survey data; Random-effects panel probit with endogenous selection; Markov chain (search for similar items in EconPapers)
JEL-codes: C23 C25 H26 J46 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:kap:empiri:v:46:y:2019:i:3:d:10.1007_s10663-018-9403-0