Labour protection and informal work: A cross-national analysis of European countries, 2004–2012

Abstract

Informal work, defined as work performed without a formal contract, lowers productivity, reduces tax revenue and hampers economic growth. Reducing informal work is a policy objective in developed and developing countries alike. Yet, particularly since the onset of the global financial crisis in 2008, most socio-economic policy reforms across Europe have reduced the generosity of unemployment benefit schemes and deregulated employment protection. The authors argue that, while such reforms may have contributed to reducing unemployment, they might also have increased the incidence of informal work. Using European Social Survey data for 2004–12, they find that labour protection is effective in reducing informal wage employment.