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Unreported Employment and Envelope Wages in Mid-Transition: Comparing Developments and Causes in the Baltic Countries

Jaanika Meriküll () and Karsten Staehr ()
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Jaanika Meriküll: Faculty of Economics and Business Administration, University of Tartu, Narva 4, Tartu 51009, Estonia.

Comparative Economic Studies, 2010, vol. 52, issue 4, 637-670

Abstract: This paper compares the prevalence and determinants of unreported employment in the three Baltic countries in 1998 and 2002 using a hitherto little used data set. The prevalence of unreported employment varies substantially across the three countries and across the two sampling years. Microeconometric estimations show that firm-related characteristics, such as sectoral activity, firm size and employment changes, are important determinants of unreported employment in all three countries. The impact of socio-demographic factors, such as gender, age and education, is generally less important and varies across countries and time. Only a small part of the changes in unreported employment between 1998 and 2002 can be accounted for by changes in firm-specific factors and socio-demographic characteristics. Exploratory calculations suggest that the gain for individuals undertaking unreported employment is modest or non-existent, in particular among individuals who engage regularly in such activities. This suggests that the many of the recipients of envelope wages may have few alternatives to accepting unreported employment.

Date: 2010
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