Eliciting Permanent and Transitory Undeclared Work from Matched Administrative and Survey Data
Peter Elek () and
János Köll? ()
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Peter Elek: Eötvös Lorand University
János Köll?: Hungarian Academy of Sciences
No 10800, IZA Discussion Papers from Institute for the Study of Labor (IZA)
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 per cent of workers went permanently unreported for six consecutive years, and a further 4 per cent 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, various forms of atypical employment, and small firms. Transitory non-reporting may be partly explained by administrative records missing for technical reasons. The results suggest that (i) 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 (ii) the long-term pension consequences of undeclared work are substantial because of the high share of permanent non-reporting.
Keywords: random-effects panel probit with endogenous selection; matched administrative-survey data; labour input method; undeclared work; Markov chain (search for similar items in EconPapers)
JEL-codes: C23 C25 H26 J46 (search for similar items in EconPapers)
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