Corporate labour share of income and the shadow economy: a cross-country analysis
What is it about?
This article addresses a link between the size of the shadow economy and the corporate labour share of income in the European Union. Fixed individual and time effects models suggest that there is a negative link between these two indicators. The coefficients are statistically significant if we control for other variables related to labour markets, such as unemployment rates or strictness of employment protection (regular contracts). Depending on the exact model specification, our estimates suggest that an increase in the shadow economy by 1% of GDP results in a 0.5–1% decline in the labour share of income in the corporate sector.
Why is it important?
We explained the direct link between the shadow economy and labour share of income
The following have contributed to this page: Igor Fedotenkov