Skip to main content
SpringerLink
Log in

Social Capital and Undeclared Work: An Empirical Analysis in Italy from 1998 to 2008

  • Published:
Social Indicators Research Aims and scope Submit manuscript

Abstract

The issue of irregular work has been well known in Italy since the early seventies. Undeclared work is a particular facet of shadow economy where employers evade tax typically by underreporting either the numbers of workers or the hours worked or both and, by this mean, they avoid paying the legally due social security contributions. As any form of shadow activity, undeclared work introduces important biases in the economic system. That is why, it is of paramount interest for policy makers to understand which are the factors influencing undeclared work. The Italian National Institute of Statistics has developed a methodology in the vanguard to estimate the rate of irregular work and today we have time series long enough for a review of the phenomenon. When looking at regional rates of irregular work it’s stunning how dissimilar they are and this dissimilarity is kept over time. This paper aims to understand the reasons of this heterogeneous dynamics and to identify it’s determinants, focusing in particular on the role of social capital. We use a dynamic panel model to measure the impact of social capital and of some other relevant variables on regional irregular work rates. We find that social capital ha a significant effect. It reveals itself to be a key factor in hindering the use of irregular workers.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others

Notes

  1. According to the World Bank, social capital includes the institutions, the relationships, the attitudes and values that govern interactions among people and contribute to economic and social development. In Sect. 2 there is a throughout discussion on social capital.

  2. The evasion can be done in many different ways. Employers can declare the right number of workers, but under report the hours worked or the position covered. An extreme form of underreporting occurs when employer completely hide to Fiscal authorities one or more workers.

  3. IWR is the ratio between the irregular and the total labor units.

  4. The micro and small firms are those with less that 10 employees.

  5. SCI stands for Social Capital Initiative and is a World Bank network devoted to the study of social capital.

  6. In Italy there is a tax on TV possession. According to the most important italian consumer association (Codacons), in 2012 the percentage of evasion of this tax was 800 millions euros, corresponding to a share of evading families of 44 %. Because of the ease of evading, TV tax compliance can be used as indicator of civic duty.

  7. This turning point is the effect of two amnesties on irregular immigrants: all at a sudden, a huge amount of irregular workers (the illegal immigrants) are declared and hired with a regular position.

  8. Model estimations were done using the command xtabond2 in STATA 11 (Roodman 2009).

  9. We verified that for both models (meaning those arising from the two definitions of SCI) no unit root exist.

References

  • Achilli, R. (2006). Occupazione irregolare, mercato del lavoro e condizioni competitive delle imprese: una analisi territoriale. In Pisa, XXVII Conferenza Italiana di Scienze Regionali.

  • Achilli, R. (2009). Sommerso economico, occupazione irregolare, mercato del lavoro e condizioni competitive delle imprese nelle regioni italiane. Rivista Economica del Mezzogiorno, 3, 461–492.

    Google Scholar 

  • Achilli, R., & de Candia, G. (2010). La stima delle determinanti strutturali del tasso di irregolarità del lavoro in Italia: un’analisi settoriale. Rivista di Economia e Statistica del Territorio, 2, 70–103.

    Google Scholar 

  • Alesina, A., & Giuliano, P. (2010). The power of the family. Journal of Economic Growth, 15, 93–125.

    Article  Google Scholar 

  • Alesina, A., & Giuliano, P. (2011). Family ties and political participation. Journal of European Economic Association, 9(5), 817–839.

    Article  Google Scholar 

  • Allingham, M.G., & Sandmo, A. (1972). Income tax evasion: A theoretical analysis. Journal of Public Economics, 1, 323–338.

    Article  Google Scholar 

  • Alm, J., Martinez-Vasquez, J., & Torgler, B. (2006). Russian attitude towards paying taxes before, during and after transition. International Journal of Social Economics, 33(12), 832–857.

    Article  Google Scholar 

  • Angelucci, L., & Pericolini, F. (2009). Marginalità economica del territorio: modelli panel per l’interpretazione dell’irregolarità del lavoro e delle sofferenze bancarie in Italia. In G. Alleva, & P.D. Falorsi (Eds.), Indicatori e modelli statistici per la valutazione degli squilibri territoriali (pp. 201–220). Milano: Franco Angeli.

    Google Scholar 

  • Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58, 277–297.

    Article  Google Scholar 

  • Arezzo, M.F., & Alleva, G. (2012). Estimating the probability of moonlighting in Italian building industry. In A. Di Ciaccio, M. Coli, & J.M. Angulo Ibanez (Eds.), Advanced statistical methods for the analysis of large data-sets (pp. 319–328). Berlin: Springer.

    Chapter  Google Scholar 

  • Bovi, M., & Castellucci, L. (2001). Cosa sappiamo dell’economia sommersa in Italia al di lá dei luoghi comuni? Alcune proposizioni empiricamente fondate. Economia Pubblica, 6, 77–119.

    Google Scholar 

  • Burt, R.S. (2000). The network structure of social capital. In R.I. Sutton, & B.M. Stow (Eds.), Research in organizational behavior. Greenwich: JAI Press.

  • Cappariello, R., & Zizza, R. (2004). Economia sommersa e contesto istituzionale ed economico: un’analisi regionale. In Presented at Convegno dell’Associazione Italiana degli Economisti del Lavoro. Modena.

  • Coleman, J. (1988). Social capital in the creation of human capital. American Journal of Sociology, Supplement: Organization and Institutions: Sociological and Economic Approaches to the Analysis of Social Structure, 94, 95–120.

    Google Scholar 

  • Coleman, J. (1990). Foundation of social theory. Cambridge, MA: The Belknap Press of Harvard University.

    Google Scholar 

  • Degli Antoni, G. (2006). Capitale sociale e crescita economica: verifica empirica a livello regionale e provinciale. Rivista Italiana degli Economisti, 3(2), 363–394.

    Google Scholar 

  • De Blasio, G., & Nuzzo, G. (2005). Il capitale sociale a la Putnam e le regioni italiane: unanalisi empirica. Scienze Regionali, 4(1), 37–69.

    Google Scholar 

  • Fine, B. (2001). Social capital versus social theory. Political economy and social science at the turn of the millenium. London and New York: Routledge.

    Google Scholar 

  • Fine, B. (2010). Theories of social capital: Researches behaving badly. London: Pluto Press.

    Google Scholar 

  • Foley, M.W., & Edwards, B. (2013). Escape from politics? Social theory and the social capital debate. American Behavioral Scientist, 40(5), 550–561.

    Google Scholar 

  • Foley, M.W., & Edwards, B. (1999). Is it time to disinvest in social capital? Journal of Public Policy, 19(2), 199–231.

    Article  Google Scholar 

  • Fukuyama F. (1995) Trust. New York: Free Press Paperbacks.

    Google Scholar 

  • Fukuyama, F. (1999). Social capital and civil society. In International monetary fund conference on second generation reforms, November 8–9, Washinghton DC.

  • Grootaert, C., & van Bastelaer, T. (2001). Understanding and Measuring Social Capital: A Synthesis of Findings and Recommendations from the Social Capital Initiative. Social Capital Initiative Working Paper, 24, World Bank, Washington.

  • Guiso, L., Sapienza, P., & Zingales, L. (2008). Long Term Persistence. Chicago, Chicago GSB, Research Paper, n. 08–11.

  • Hanifan, L.J. (1916). The rural school community centre. Annals of American Academy of Political and Social Science, 67, 130–138.

    Google Scholar 

  • Hanifan, L. J. (1920). The Community Center. Boston: Silver Burdette.

    Google Scholar 

  • Harriss, J. (2002). Depolicizing development: The World Bank and Social Capital. London: Anthem Press.

    Google Scholar 

  • Holtz-Eakin, D., Newey, W., & Rosen, H. S. (1988). Estimating vector autoregressions with panel data. Econometrica, 56, 1371–1395.

    Article  Google Scholar 

  • Kanniainen, v., Paakkonen, J., & Schneider, F. (2004). Fiscal and Ethical Determinants of Shadow Economy: Theory and Evidence. Helsinki Center of Economic Research Discussion Paper No. 30. URL: http://ethesis.helsinki.fi/julkaisut/eri/hecer/disc/30/fiscalan.pdf.

  • Islam, M.K., Merlo, J., Kawachi, I., Lindström, & Gerdtham, U.G. (2006). Social capital and health: Does Egalitarism matter? A literature review. International Journal for Equity in Health, 5, 1–28.

  • Lin, N. (2001). Social capital. A theory of social structure and action. New York: Cambridge University Press.

    Book  Google Scholar 

  • Lucifora, C. (2003). Economia sommersa e lavoro nero. Bologna: Il Mulino.

    Google Scholar 

  • Micucci, G., & Nuzzo, G. (2005). La misurazione del capitale sociale: unanalisi sulle regioni italiane. In F. Signorini, & M. Omicciolo (Eds.), Economie locali e competizione globale (pp. 207–250). Bologna: Il Mulino.

    Google Scholar 

  • North D.C. (1990). Institutions, institutional changes and economic performance. Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • OECD. (2001). The well-being of nations the role of human and social capital. Paris: OECD.

  • Olson, M. (1982). The rise and the fall of nations growth, stagflation and social rigidities. New Haven: Yale University Press.

    Google Scholar 

  • Putnam, R., Leonardi, R., & Nanetti, R. (1993). Making democracy work: Civic traditions in Modern Italy. Princeton: Princeton University Press.

    Google Scholar 

  • Putnam, R. (1995). Bowling alone: Americas declining social capital. Journal of Democracy, 6(1), 65–78.

    Article  Google Scholar 

  • Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. Stata Journal, StataCorp LP, 9(1), 86–136.

    Google Scholar 

  • Santini, I. (2008). Social capital and its impact on the production process. International Journal of Management and Decision Making, 9(5), 509–525.

    Article  Google Scholar 

  • Schneider, F., & Enste, D. H. (2000). Shadow economies: Size, causes and consequences. Journal of Economic Literature, 38, 77–114.

    Google Scholar 

  • Schneider, F. (2000). The increase of the size of the shadow economy of 18 OECD-countries: Some preliminary explanations. In Paper presented at the annual public choice meeting, March 10–12, Charleston.

  • Torgler, B. (2003). Tax Morale and Tax Compliance: Evidence fro the United States. WWZ Discussion Paper, 2.

  • Torgler, B. (2004). Tax moral in Asian Countries. Journal of Asian Economics, 15, 237–266.

    Article  Google Scholar 

  • Torgler, B. (2005). Tax morale in Latin America. Public Choice, 122(1), 133–157.

    Article  Google Scholar 

  • World Bank. (1998). The Initiative on Defining, Monitoring and Measuring Social Capital. Text of proposals approved for funding, social capital initiative. Working Paper 2.

Download references

Acknowledgments

This work is funded by the project IDEL leaded by the Italian Minister of Labor and Social Policies through Italia Lavoro. We would like to thank Isabella Santini, Mauro Rota, Edoardo Di Porto and Fabio Sabatini for the very useful suggestions that made this study possible. A special thank goes to Lovisa Stephenson.

Author information

Authors and Affiliations

  1. Dpt. Memotef, Sapienza University of Rome, Via del Castro Laurenziano 9, 00161, Rome, Italy

    Maria Felice Arezzo

Authors
  1. Maria Felice Arezzo
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Maria Felice Arezzo.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Arezzo, M.F. Social Capital and Undeclared Work: An Empirical Analysis in Italy from 1998 to 2008. Soc Indic Res 118, 695–709 (2014). https://doi.org/10.1007/s11205-013-0434-4

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11205-013-0434-4

Keywords

Search

Navigation