Joint Empirical Social Science Seminar
October 25, 2006
In this paper we have investigated the nature of the relation between underground employment and unions, starting from a very simple intuition, that is the hypothesis of the existence of two different and opposite channels through which unions affect underground employment. The econometric investigation with Italian data has confirmed this intuition, pointing out two main results. The presence of unions generates shadow activities via higher wages and market rigidities. By contrast, the relationship between union strength and the hidden economy may turn out to be negative when considering regression based on sectorial or industry data, even though it is not uniform among economic sectors.