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The Perverse Effect of Flexible Work Arrangements on Informality

Author

Listed:
  • di Porto, Edoardo

    (University of Naples Federico II)

  • Garibaldi, Pietro

    (Collegio Carlo Alberto)

  • Mastrobuoni, Giovanni

    (Collegio Carlo Alberto)

  • Naticchioni, Paolo

    (Roma Tre University)

Abstract

Flexible work arrangements are on the rise in many countries, ranging from Germany's mini-jobs to UK's zero-hours contracts. These contracts allow for quick labor demand adjustments and are also seen as a way to discourage undeclared work, and more than 10 years ago Italy introduced what was arguably one of the most exible alternative work arrangements: "labor vouchers". The labor vouchers could be easily purchased to pay for occasional work, with no additional paper work. Between 2008 and 2016 the number of 10-euro labor vouchers purchased in a year went up from 500,000 (less than 1 per 100 inhabitants) to almost 300 million (about 5 times the Italian population). Using random timing in labor inspections, as well as the abolition of labor vouchers, we document a perverse effect of badly designed alternative work arrangements: they severely disrupt the work of labor inspectors, allowing firms to increase the amount of undeclared work. Firms who use vouchers for this purpose are shown to hire more regular part-time and fixed-term workers when vouchers become unavailable.

Suggested Citation

  • di Porto, Edoardo & Garibaldi, Pietro & Mastrobuoni, Giovanni & Naticchioni, Paolo, 2022. "The Perverse Effect of Flexible Work Arrangements on Informality," IZA Discussion Papers 15794, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15794
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    References listed on IDEAS

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    Cited by:

    1. Katharina Pfeil & Matthias Kasper & Sarah Necker & Lars P. Feld, 2024. "Tax System Design, Tax Reform, and Labor Supply," CESifo Working Paper Series 11350, CESifo.
    2. Bernardo Fanfani & Filippo Passerini, 2024. "Do Alternative Work Arrangements Substitute Standard Employment? Evidence from Worker-Level Data," Working Papers wp1190, Dipartimento Scienze Economiche, Universita' di Bologna.

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    More about this item

    Keywords

    informality; labor vouchers; flexible work arrangements; occasional work; zero-hour contracts;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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