Structural and Cyclical Patterns of Underground Labour Input in Italy from 1980 to 2004

9 Pages Posted: 17 May 2007

See all articles by Bruno Chiarini

Bruno Chiarini

University of Naples, Parthenope

Elisabetta Marzano

University of Naples Parthenope - Department of Economic Studies (DES)

Date Written: May 2007

Abstract

In this paper we investigated empirically the nature of underground employment in Italy, considering its long-run trend and short-run fluctuations. The examined time series of underground employment is provided by the Italian National Institute of Statistics (ISTAT), though for the business cycle analysis we also employ a time series of evaded tax base provided by the Ministry of Finance. The analysis focuses on the period 1980-2003, a time span during which major labour market reforms occurred in Italy, with an evident impact on underground employment.

Our investigation pointed out several interesting regularities. Cyclical behaviour of the regular labour input is deeply affected by the aggregate measure of economic activity used as reference variables, i.e. total or market GDP. Second, the cyclical regularities indicate that the resources allocated to the underground economy are mostly motivated by flexibility requirements. Third, the dynamic adjustments of employment between the regular and underground market, are inextricably tied to one another over the cycle. Surprisingly, the relationship between the labour inputs changes with the GDP measure adopted. It may highlight a reallocation mechanism among labour inputs or a labour drag effect.

Keywords: Underground employment; business cycle, labour allocation mechanism

JEL Classification: E26, E32, J21

Suggested Citation

Chiarini, Bruno and Marzano, Elisabetta, Structural and Cyclical Patterns of Underground Labour Input in Italy from 1980 to 2004 (May 2007). Available at SSRN: https://ssrn.com/abstract=986542 or http://dx.doi.org/10.2139/ssrn.986542

Bruno Chiarini (Contact Author)

University of Naples, Parthenope ( email )

Via Generale Parisi 13
Napoli, 80133
Italy

Elisabetta Marzano

University of Naples Parthenope - Department of Economic Studies (DES) ( email )

via Medina 40
Naples, 80133
Italy

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