Measuring the Global Shadow Economy

Measuring the Global Shadow Economy

The Prevalence of Informal Work and Labour

Colin C. Williams and Friedrich Schneider

This book brings together two leading researchers in the field to provide a comprehensive overview of the shadow economy from a global perspective. Reviewing the advantages and disadvantages of different ways of measuring the informal sector, the authors evaluate its size and key determinants across the world. Williams and Schneider clearly establish the persistence and prevalence of the shadow economy, analysing the narrowness of existing policy approaches and explaining how these fail to address the key factors for its existence and may even exacerbate the problem.

Chapter 7: The shadow labour force in developed countries

Colin C. Williams and Friedrich Schneider

Subjects: economics and finance, labour economics, public finance, social policy and sociology, labour policy

Extract

The aim of this chapter is to evaluate the cross-national variations in the size and character of the shadow labour force, but this time in relation to developed countries. To do this, the same analytical framework examining the degree of informalization will be used to reveal the varying extent of the shadow labour force. To examine the nature of the shadow labour force, meanwhile, a slightly different approach is adopted in this chapter. In the developed world, there has been an emergent recognition that participation in the shadow labour force is not always necessity-driven and a result of the exclusion of workers from the formal economy (Gerxhani, 2004; Maloney, 2004; Perry and Maloney, 2007; Snyder, 2004; Williams, 2010a, 2010b). Here, therefore, we examine the nature of the shadow labour force by examining whether participants are driven by exclusion from the formal economy or by a voluntary decision to exit the formal economy. The data here used is the 2007 Eurobarometer survey of the then 27 member states of the European Union (EU-27). The outcome will be to reveal that although there is a lower prevalence of a shadow labour force in developed countries, not only are there cross-national variations in the level of employment in the shadow economy but also in the character of such employment.

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