Purpose: This paper tries to identify the wage gap between informal and formal workers and tests for the two-tier structure of the informal labour market in Poland.
Design/methodology/approach: I employ the propensity score matching (PSM) technique and use data from the Polish Labour Force Survey (LFS) for the period 2009–2017 to estimate the wage gap between informal and formal workers, both at the means and along the wage distribution. I use two definitions of informal employment: a) employment without a written agreement and b) employment while officially registered as unemployed at a labour office. In order to reduce the bias resulting from the non-random selection of
individuals into informal employment, I use a rich set of control variables representing several individual characteristics.
Findings: After controlling for observed heterogeneity, I find that on average informal workers earn less than formal workers, both in terms of monthly earnings and hourly wage. This result is not sensitive to the definition of informal employment used and is
stable over the analysed time period (2009–2017). However, the wage penalty to informal employment is substantially higher for individuals at the bottom of the wage distribution, which supports the hypothesis of the two-tier structure of the informal labour market in Poland.
Originality/value: The main contribution of this study is that it identifies the two-tier structure of the informal labour market in Poland: informal workers in the first quartile of the wage distribution and those above the first quartile appear to be in two partially different segments of the labour market.
The paper aims to assess the impact of selected elements of social harmonization on labor market performance in the European Union among two groups of workers—the total working population and the elderly. The aim is to examine whether upward changes in labor taxes affect employment, unemployment, and inactivity rates in the European Union.
The analytical research on the economic developments in BH by international financial institutions, especially the IMF and World Bank, as well as domestic bodies, especially the Economic Policy Research Unit, was extensively exploited in the research. However, the primary focus of the research was on structural and institutional aspects facilitating or impeding functioning of a market economy in the BH and country's capacity to cope with competitive pressure and market forces within the EU. Therefore, the report focuses on background analysis of economic factors influencing the functioning of market economy and the capacity to withstand the competition in the EU market.
Authored by: Malgorzata Antczak, Rafal Antczak, Karina Kostrzewa, Ranko Markus, Wojciech Paczynski
Published in 2007
The idea of a Deep and Comprehensive Free Trade Agreement goes beyond the traditional concept of trade liberalization and, apart from the elimination of tariffs in trade of goods, it also includes the reduction/ removal of non-tariff barriers, the liberalization of the investment regime, the liberalization of trade in services, and the far-reaching harmonization/ mutual recognition of various trade and investment-related regulations and institutions. The economic literature, CGE modeling exercises and the practical experience of “deep” trade integration suggest a substantial potential for the future EU-Ukraine DCFTA in promoting trade and investments, creating additional welfare and employment, regulatory and institutional harmonization with EU’s acquis, and modernizing Ukraine’s economy. While beneficial for both sides, the potential gains (but also potential adjustment costs) are greater for Ukraine as it is the smaller partner with higher initial trade barriers. However, the DCFTA does not include an automatic guarantee of success. Very much depends on the political will and administrative capacity to implement all of its provisions in a timely and accurate manner. This is a serious challenge for Ukraine, which has a mixed record in reforming its economy and state and which is still struggling to fulfill all of its commitments undertaken during the WTO accession process.
Authored by: Marek Dabrowski and Svitlana Taran
Published in 2012
Poland’s new Employee Capital Plans (PPK) scheme, which is mandatory for employers, started to be implemented in July 2019. The article looks at the systemic solutions applied in the programme from the perspective of the concept of the simultaneous reconstruction of the retirement pension system. The aim is to present arguments for and against the project from the point of view of various actors, and to assess the chances of success for the new system. The article offers a detailed study of legal solutions, an analysis of the literature on the subject, and reports of institutions that supervise pension funds. The results of this analysis point to the lack of cohesion between certain solutions of the 1999 pension reform and expose a lack of consistency in how the reform was carried out, which led to the eventual removal of the capital part of the pension system. The study shows that additional saving for old age is advisable in the country’s current demographic situation and necessary for both economic and social reasons. However, the systemic solutions offered by the government appear to be chiefly designated to serve short-term state interests and do not create sufficient incentives for pension plan participants to join the programme.
The purpose of this study is to explore and assess the costs and benefits of labour migration in Armenia and the potential of migration for contributing to the country’s development. We also examine how policy can be effectively formulated and implemented so that Armenia can get the most out of its migration experience. Lastly, we analyse how a phenomenon that emerged because of limited opportunities for employment – migration – evolved into a strategy towards development and prosperity.
Based on this analysis, this paper makes a strong argument in favour of implementing programs in Armenia that involve the active collaboration of government institutions and the Armenian Diaspora, duly considering the unusual influence the latter has on Armenia’s economic and human development.
Authored by: Gagik Makaryan and Mihran Galstyan
Published in 2013
The paper aims to assess the impact of selected elements of social harmonization on labor market performance in the European Union among two groups of workers—the total working population and the elderly. The aim is to examine whether upward changes in labor taxes affect employment, unemployment, and inactivity rates in the European Union.
The analytical research on the economic developments in BH by international financial institutions, especially the IMF and World Bank, as well as domestic bodies, especially the Economic Policy Research Unit, was extensively exploited in the research. However, the primary focus of the research was on structural and institutional aspects facilitating or impeding functioning of a market economy in the BH and country's capacity to cope with competitive pressure and market forces within the EU. Therefore, the report focuses on background analysis of economic factors influencing the functioning of market economy and the capacity to withstand the competition in the EU market.
Authored by: Malgorzata Antczak, Rafal Antczak, Karina Kostrzewa, Ranko Markus, Wojciech Paczynski
Published in 2007
The idea of a Deep and Comprehensive Free Trade Agreement goes beyond the traditional concept of trade liberalization and, apart from the elimination of tariffs in trade of goods, it also includes the reduction/ removal of non-tariff barriers, the liberalization of the investment regime, the liberalization of trade in services, and the far-reaching harmonization/ mutual recognition of various trade and investment-related regulations and institutions. The economic literature, CGE modeling exercises and the practical experience of “deep” trade integration suggest a substantial potential for the future EU-Ukraine DCFTA in promoting trade and investments, creating additional welfare and employment, regulatory and institutional harmonization with EU’s acquis, and modernizing Ukraine’s economy. While beneficial for both sides, the potential gains (but also potential adjustment costs) are greater for Ukraine as it is the smaller partner with higher initial trade barriers. However, the DCFTA does not include an automatic guarantee of success. Very much depends on the political will and administrative capacity to implement all of its provisions in a timely and accurate manner. This is a serious challenge for Ukraine, which has a mixed record in reforming its economy and state and which is still struggling to fulfill all of its commitments undertaken during the WTO accession process.
Authored by: Marek Dabrowski and Svitlana Taran
Published in 2012
Poland’s new Employee Capital Plans (PPK) scheme, which is mandatory for employers, started to be implemented in July 2019. The article looks at the systemic solutions applied in the programme from the perspective of the concept of the simultaneous reconstruction of the retirement pension system. The aim is to present arguments for and against the project from the point of view of various actors, and to assess the chances of success for the new system. The article offers a detailed study of legal solutions, an analysis of the literature on the subject, and reports of institutions that supervise pension funds. The results of this analysis point to the lack of cohesion between certain solutions of the 1999 pension reform and expose a lack of consistency in how the reform was carried out, which led to the eventual removal of the capital part of the pension system. The study shows that additional saving for old age is advisable in the country’s current demographic situation and necessary for both economic and social reasons. However, the systemic solutions offered by the government appear to be chiefly designated to serve short-term state interests and do not create sufficient incentives for pension plan participants to join the programme.
The purpose of this study is to explore and assess the costs and benefits of labour migration in Armenia and the potential of migration for contributing to the country’s development. We also examine how policy can be effectively formulated and implemented so that Armenia can get the most out of its migration experience. Lastly, we analyse how a phenomenon that emerged because of limited opportunities for employment – migration – evolved into a strategy towards development and prosperity.
Based on this analysis, this paper makes a strong argument in favour of implementing programs in Armenia that involve the active collaboration of government institutions and the Armenian Diaspora, duly considering the unusual influence the latter has on Armenia’s economic and human development.
Authored by: Gagik Makaryan and Mihran Galstyan
Published in 2013
The authors use the insights from strategy research and innovation studies to address two principal questions regarding the technology strategy of a firm: what are the distinct elements of technology strategy and what are the strategy determinants? Equipped with Zahra’s (1996) concept of measuring technology strategy, we analyze data from two runs of the Community Innovation Survey for Polish service firms. They propose a set of indicators reflecting four principal fields of technology strategy: pioneer-posture, R&D efforts, technology portfolio, and monitoring activities. Interactions between the strategic variables are analyzed and their determinants are assessed. The results suggest that technology strategies are determined by both factors external to the firm, and by the hitherto less stressed in the CIS-based empirical literature, internal factors. The role of internal factors increases with the macroeconomic environment becoming less favourable.
Authored by: Krzysztof Szczygielski, Wojciech Grabowski, Richard Woodward
Published in 2013
Masterthesis exploring the concept of branding in the political marketplace. Specifically branding for political parties. Case study from Norway and The Green Party using the Identity Theory.
The aim of this report is a deepened recognition of employment in long-term care (LTC). It presents past and future trends in the development of LTC employment. Authors collected scattered statistical information, estimated lacking data and projected future growth in the number of employed in care services. Performed analysis includes employment in the health and social sector and across various types of care. Projections of the demand for care and supply of the LTC workforce are based on the demographic prognosis of the population size and changes in the age structure taking into account different scenarios for demographic development. Results show the growing gap between demand and supply in the LTC employment. The policy towards aging in Poland must take up the challenge of growing care needs, family changes and lower opportunities for provision of informal care.
Authored by: Stanislawa Golinowska, Ewa Kocot, Agnieszka Sowa
Published in 2014
New financial institutions, pension funds, are being established in Central and Eastern Europe, that are also an important element of the social security system. They provide an additional source of income in old age. This source is all the more important insofar as public, pay-as-you-go pension systems in many countries are having problems with meeting previous pension commitments, which were often excessively generous and did not take into account potential changes in demographic conditions and the labour market.
The subject of our consideration will be the experiences relating to pension fund regulations from the point of view of their safety of operations in five countries of Central and Eastern Europe.
Authored by: Stanislawa Golinowska and Piotr Kurowski
Published in 2000
Ukraine is a migration-intensive country, with an estimated 1.5-2 million labour migrants (about 5% of the working-age population). Slightly over a half of these migrants travel for work to the EU. This study discusses the impact of this large pool of migrants on both the sending and receiving countries. It also assesses how liberalisation of the EU visa regime, something that the EU is currently negotiating with Ukraine, will affect the stream of Ukrainian labour migrants to EU countries. Our study suggests that the number of tourists will increase substantially, whereas the increase in the number of labour migrants is unlikely to be very large. We also suggest that the number of legal migrants is likely to increase, but at the same time the number of illegal migrants will decline because currently only a third of migrants from Ukraine have both residence and work permits in the EU, while about a quarter of them stay there illegally.
Authored by: Hannah Vakhitova and Tom Coupé
Published in 2013
In contrast to other studies of competitiveness which often focus on the country and industry level, this is a study of competitiveness in Poland at the firm level. In this analysis, the authors focus primarily on how cooperation with external actors such as investors, creditors, customers, suppliers, local governments affects changes in Polish firms’ competitiveness.
Authored by: Katarzyna Binkiewicz, Jacek Cukrowski, Michal Gorzynski, Malgorzata Jakubiak, Amelia Kalukiewicz, Piotr Wojcik. Richard Woodward
Published in 2005
This study provides an analysis of the costs and benefits of emigration for Georgia, with an emphasis on emigration to the EU. In the concluding section we dwell on the consequences of a possible liberalization of EU migration policies with regard to Eastern Partnership (EaP) countries, and how such a policy change would affect the flow and composition of migration from Georgia to the EU. The study estimates the costs and benefits of migration through the prism of recent economics developments in Georgia and in particular the sweeping liberalization reforms of recent years. While Georgia remains a poor country, its geopolitical position as a Western outpost in the Caucasus and Central Asian region, its role as a key trade and transportation hub, the superior quality of its bureaucracy, lack of corruption, etc., provide a very different context for migration processes, turning migration into a circular phenomenon, a major factor in modernizing the Georgian economy, society, and politics. The EU should give due consideration to this phenomenon as it (re)considers its policy on migration with regard to Georgia and, potentially, other EaP countries.
Authored by: Lasha Labadze and Mirian Tukhashvili
The projection examines impact of demographic changes and changes in health status on future (up to 2050) health expenditures. Next to it, future changes in the labour market participation and their imact on the health care system revenues are examined. Results indicate that due to demographic pressures health expenditures will increase in the next 40 years and health care systems in the NMS will face deficit. Moreover, health revenues, expenditures and deficit/surplus are slightly sensitive to possible labour market changes. Health care system reforms are required in order to balance the disequilibrium of revenues and expenditures caused by external factors (demographic and economic), and decrease the premium needed to cover expenditures. Such reforms should lead, on the one hand, to the rationing of medical services covered by public resources, and on the other, to more effective governance and management of the sector and within the sector.
Authored by: Stanislawa Golinowska, Ewa Kocot, Agnieszka Sowa
Published in 2008
The transition process from a centralised to a market economy in Poland has been accompanied by an unprecedented increase in poverty and a deepening of inequality across households – not only in terms of income but also in terms of socio-economic status.
Although a small number of studies describing the economic situation of the poor in Poland have been undertaken, our understanding of the mechanisms that make poverty persist in the household context is considerably limited. The interaction of a number of factors may for example, result in individuals being trapped in a vicious circle of poverty. Low household income may lead to social exclusion and family distress, which is likely to have far-reaching consequences for all household members. Social exclusion may contribute to foster alcoholism, impede the human capital investment in children, and thus jeopardise the socioeconomic situation of the next generation. Socially excluded people experience severe difficulties in finding re-employment. Social transfers might even worsen the situation by providing a disincentive to seek work.
Authored by: Miriam Beblo, Stanislawa Golinowska, Charlotte Lauer, Katarzyna Pietka-Kosinska, Agnieszka Sowa
Published in 2002
This document is created to offer assistance to ACCA students/affiliates who are undertaking the ACCA/OBU BSc Research and Analysis Project (RAP). The RAP is very different to an ACCA written exam. Every project is a separate piece of work. Each student has to identify their own individual project topic, set research objectives, and develop a framework for their project work. Appropriate Models Include;
Topic 6 requires the use of more than one motivation model, preferably a ‘content’ model and a ‘process’ model.
Topic 8 requires appropriate financial ratios and business models such as SWOT, PESTEL, Porter’s Five Forces, etc.
Topics 2, 4,5, 9 require the use of general evaluation models such as cost/benefit analysis, managing change models, systems development lifecycle, etc.
Topic 18 requires the use of one or more models for evaluating the marketing environment as well as, for example, the marketing mix for evaluating the marketing strategy of an organisation, and an appropriate model for evaluating its effectiveness.
The report discusses employment in the health care system in Poland based on analysis and projections of the demand and supply of medical workforce. The impact of the financial situation and policy on relativelly low employment level of medical personel was accounted for in the analysis while projections were driven by demographic changes in the following two decades. Results of different demographic variants of projections used in Neujobs project and additional scenarios show that while ageing is an important factor that may stimulate demand for provision of medical personnel, changes might be mitigated by further increase in efficiency of care. At the same time the supply of care will be affected by ageing too. The results indicate that more detailed monitoring of employment in the future will be needed in order to assure adequacy of provision of medical professionals, especially of nurses (critical gap), some medical specialists, physiotherapists and medical technical personnel.
This report was prepared within a research project entitled NEUJOBS, which has received funding from the European Union’s Seventh Framework Programme for research, technological development and demonstration under grant agreement no. 266833.
Written by Stanislawa Golinowska, Agnieszka Sowa and Ewa Kocot. Published in August 2014.
PDF available on our website at: http://www.case-research.eu/en/node/58694
BR 6 / Řízení VaV a systémy financování výzkumu v mezinárodní praxiMEYS, MŠMT in Czech
R&D governance and institutional funding in international practice
/
This report constitutes a background report to the Final report 2 – The Institutional Funding Principles. It collects the outcomes of the analyses related to the R&D governance and funding systems in international practice (‘comparator’ countries: Austria, the Netherlands, Norway, Sweden and the UK). It sets the context for the study team’s reflections on the strength and weaknesses of the current institutional funding system in the Czech Republic and especially for the proposed revision of the funding principles.
This study investigates the HBS effect in a panel of nine CEECs during 1993:Q1-2003:Q4 (unbalanced panel). Prior to estimating the model, we analyze several key assumptions of the model (e.g. wage equalisation, PPP and sectoral division) and elaborate on possible consequences of their failure to hold. In the empirical part of the paper, we check the level of integration of the variables in our panel using the Pedroni panel-stationarity tests. We then investigate the internal and external version of the HBS effect with the Pedroni panel-cointegration tests as well as by means of group-mean FMOLS and PMGE estimations to conclude that there is a strong evidence in support of the internal HBS and ambiguous evidence regarding the external HBS. Our estimates of the size of inflation and real appreciation consistent with the HBS effect turned out generally within the range of previous estimates in the literature (0-3 % per annum). However, we warn against drawing automatic policy conclusions based on these figures due to very strong assumptions on which they rest (which may not be met in near future). Finally, following the hypotheses put forward in the literature, we elaborate and attempt to evaluate empirically the potential impact of exchange rate regimes on the magnitude of the HBS effect.
Authored by: Monika Blaszkiewicz, Przemyslaw Kowalski, Łukasz Rawdanowicz, Przemyslaw Wozniak
Published in 2004
Demographic change (driven by the second demographic transition) led to an uncontrolled increase in scale of various social expenditure in the OECD area, especially in continental Europe. Costs of social transfers created fiscal pressure leading to the necessity of tax increases all over Europe, including the New Member States. Employment consequences of emerging higher tax wedge has become the topic of large body of research. However, surprisingly little evidence is known on distribution of that problem across workers. Is the effect of high tax wedge equally spread or certain groups of workers suffer more than others? More specifically, are low productivity workers exposed more to the problems caused by high tax wedge?
Authored by: Marek Gora, Artur Radziwill, Agnieszka Sowa, Mateusz Walewski
Published in 2006
The paper analyses the relationship between labour costs and employment development in manufacturing industry in Poland, Czech Republic and Hungary. It indicates the need for thorough labour cost analysis in Europe in the context low employment rates among New Member States. The steps taken within the framework of the EU's common employment policy emphasise the crucial role of labour costsin enhancing labour demand.
The question raised in this paper is whether the cost of hiring labour is a significant determinant of employment in Polish, Czech and Hungarian manufacturing and is considered in terms of both relative (unit labour costs) and absolute (labour costs per one employee) measures. The study examines the labour costemployment relationship aiming to find out whether it differs significantly between the three countries and between commodity groups in manufacturing industry within each country.
Authored by: Agnieszka Furmanska-Maruszak
Published in 2006
The authors use the insights from strategy research and innovation studies to address two principal questions regarding the technology strategy of a firm: what are the distinct elements of technology strategy and what are the strategy determinants? Equipped with Zahra’s (1996) concept of measuring technology strategy, we analyze data from two runs of the Community Innovation Survey for Polish service firms. They propose a set of indicators reflecting four principal fields of technology strategy: pioneer-posture, R&D efforts, technology portfolio, and monitoring activities. Interactions between the strategic variables are analyzed and their determinants are assessed. The results suggest that technology strategies are determined by both factors external to the firm, and by the hitherto less stressed in the CIS-based empirical literature, internal factors. The role of internal factors increases with the macroeconomic environment becoming less favourable.
Authored by: Krzysztof Szczygielski, Wojciech Grabowski, Richard Woodward
Published in 2013
Masterthesis exploring the concept of branding in the political marketplace. Specifically branding for political parties. Case study from Norway and The Green Party using the Identity Theory.
The aim of this report is a deepened recognition of employment in long-term care (LTC). It presents past and future trends in the development of LTC employment. Authors collected scattered statistical information, estimated lacking data and projected future growth in the number of employed in care services. Performed analysis includes employment in the health and social sector and across various types of care. Projections of the demand for care and supply of the LTC workforce are based on the demographic prognosis of the population size and changes in the age structure taking into account different scenarios for demographic development. Results show the growing gap between demand and supply in the LTC employment. The policy towards aging in Poland must take up the challenge of growing care needs, family changes and lower opportunities for provision of informal care.
Authored by: Stanislawa Golinowska, Ewa Kocot, Agnieszka Sowa
Published in 2014
New financial institutions, pension funds, are being established in Central and Eastern Europe, that are also an important element of the social security system. They provide an additional source of income in old age. This source is all the more important insofar as public, pay-as-you-go pension systems in many countries are having problems with meeting previous pension commitments, which were often excessively generous and did not take into account potential changes in demographic conditions and the labour market.
The subject of our consideration will be the experiences relating to pension fund regulations from the point of view of their safety of operations in five countries of Central and Eastern Europe.
Authored by: Stanislawa Golinowska and Piotr Kurowski
Published in 2000
Ukraine is a migration-intensive country, with an estimated 1.5-2 million labour migrants (about 5% of the working-age population). Slightly over a half of these migrants travel for work to the EU. This study discusses the impact of this large pool of migrants on both the sending and receiving countries. It also assesses how liberalisation of the EU visa regime, something that the EU is currently negotiating with Ukraine, will affect the stream of Ukrainian labour migrants to EU countries. Our study suggests that the number of tourists will increase substantially, whereas the increase in the number of labour migrants is unlikely to be very large. We also suggest that the number of legal migrants is likely to increase, but at the same time the number of illegal migrants will decline because currently only a third of migrants from Ukraine have both residence and work permits in the EU, while about a quarter of them stay there illegally.
Authored by: Hannah Vakhitova and Tom Coupé
Published in 2013
In contrast to other studies of competitiveness which often focus on the country and industry level, this is a study of competitiveness in Poland at the firm level. In this analysis, the authors focus primarily on how cooperation with external actors such as investors, creditors, customers, suppliers, local governments affects changes in Polish firms’ competitiveness.
Authored by: Katarzyna Binkiewicz, Jacek Cukrowski, Michal Gorzynski, Malgorzata Jakubiak, Amelia Kalukiewicz, Piotr Wojcik. Richard Woodward
Published in 2005
This study provides an analysis of the costs and benefits of emigration for Georgia, with an emphasis on emigration to the EU. In the concluding section we dwell on the consequences of a possible liberalization of EU migration policies with regard to Eastern Partnership (EaP) countries, and how such a policy change would affect the flow and composition of migration from Georgia to the EU. The study estimates the costs and benefits of migration through the prism of recent economics developments in Georgia and in particular the sweeping liberalization reforms of recent years. While Georgia remains a poor country, its geopolitical position as a Western outpost in the Caucasus and Central Asian region, its role as a key trade and transportation hub, the superior quality of its bureaucracy, lack of corruption, etc., provide a very different context for migration processes, turning migration into a circular phenomenon, a major factor in modernizing the Georgian economy, society, and politics. The EU should give due consideration to this phenomenon as it (re)considers its policy on migration with regard to Georgia and, potentially, other EaP countries.
Authored by: Lasha Labadze and Mirian Tukhashvili
The projection examines impact of demographic changes and changes in health status on future (up to 2050) health expenditures. Next to it, future changes in the labour market participation and their imact on the health care system revenues are examined. Results indicate that due to demographic pressures health expenditures will increase in the next 40 years and health care systems in the NMS will face deficit. Moreover, health revenues, expenditures and deficit/surplus are slightly sensitive to possible labour market changes. Health care system reforms are required in order to balance the disequilibrium of revenues and expenditures caused by external factors (demographic and economic), and decrease the premium needed to cover expenditures. Such reforms should lead, on the one hand, to the rationing of medical services covered by public resources, and on the other, to more effective governance and management of the sector and within the sector.
Authored by: Stanislawa Golinowska, Ewa Kocot, Agnieszka Sowa
Published in 2008
The transition process from a centralised to a market economy in Poland has been accompanied by an unprecedented increase in poverty and a deepening of inequality across households – not only in terms of income but also in terms of socio-economic status.
Although a small number of studies describing the economic situation of the poor in Poland have been undertaken, our understanding of the mechanisms that make poverty persist in the household context is considerably limited. The interaction of a number of factors may for example, result in individuals being trapped in a vicious circle of poverty. Low household income may lead to social exclusion and family distress, which is likely to have far-reaching consequences for all household members. Social exclusion may contribute to foster alcoholism, impede the human capital investment in children, and thus jeopardise the socioeconomic situation of the next generation. Socially excluded people experience severe difficulties in finding re-employment. Social transfers might even worsen the situation by providing a disincentive to seek work.
Authored by: Miriam Beblo, Stanislawa Golinowska, Charlotte Lauer, Katarzyna Pietka-Kosinska, Agnieszka Sowa
Published in 2002
This document is created to offer assistance to ACCA students/affiliates who are undertaking the ACCA/OBU BSc Research and Analysis Project (RAP). The RAP is very different to an ACCA written exam. Every project is a separate piece of work. Each student has to identify their own individual project topic, set research objectives, and develop a framework for their project work. Appropriate Models Include;
Topic 6 requires the use of more than one motivation model, preferably a ‘content’ model and a ‘process’ model.
Topic 8 requires appropriate financial ratios and business models such as SWOT, PESTEL, Porter’s Five Forces, etc.
Topics 2, 4,5, 9 require the use of general evaluation models such as cost/benefit analysis, managing change models, systems development lifecycle, etc.
Topic 18 requires the use of one or more models for evaluating the marketing environment as well as, for example, the marketing mix for evaluating the marketing strategy of an organisation, and an appropriate model for evaluating its effectiveness.
The report discusses employment in the health care system in Poland based on analysis and projections of the demand and supply of medical workforce. The impact of the financial situation and policy on relativelly low employment level of medical personel was accounted for in the analysis while projections were driven by demographic changes in the following two decades. Results of different demographic variants of projections used in Neujobs project and additional scenarios show that while ageing is an important factor that may stimulate demand for provision of medical personnel, changes might be mitigated by further increase in efficiency of care. At the same time the supply of care will be affected by ageing too. The results indicate that more detailed monitoring of employment in the future will be needed in order to assure adequacy of provision of medical professionals, especially of nurses (critical gap), some medical specialists, physiotherapists and medical technical personnel.
This report was prepared within a research project entitled NEUJOBS, which has received funding from the European Union’s Seventh Framework Programme for research, technological development and demonstration under grant agreement no. 266833.
Written by Stanislawa Golinowska, Agnieszka Sowa and Ewa Kocot. Published in August 2014.
PDF available on our website at: http://www.case-research.eu/en/node/58694
BR 6 / Řízení VaV a systémy financování výzkumu v mezinárodní praxiMEYS, MŠMT in Czech
R&D governance and institutional funding in international practice
/
This report constitutes a background report to the Final report 2 – The Institutional Funding Principles. It collects the outcomes of the analyses related to the R&D governance and funding systems in international practice (‘comparator’ countries: Austria, the Netherlands, Norway, Sweden and the UK). It sets the context for the study team’s reflections on the strength and weaknesses of the current institutional funding system in the Czech Republic and especially for the proposed revision of the funding principles.
This study investigates the HBS effect in a panel of nine CEECs during 1993:Q1-2003:Q4 (unbalanced panel). Prior to estimating the model, we analyze several key assumptions of the model (e.g. wage equalisation, PPP and sectoral division) and elaborate on possible consequences of their failure to hold. In the empirical part of the paper, we check the level of integration of the variables in our panel using the Pedroni panel-stationarity tests. We then investigate the internal and external version of the HBS effect with the Pedroni panel-cointegration tests as well as by means of group-mean FMOLS and PMGE estimations to conclude that there is a strong evidence in support of the internal HBS and ambiguous evidence regarding the external HBS. Our estimates of the size of inflation and real appreciation consistent with the HBS effect turned out generally within the range of previous estimates in the literature (0-3 % per annum). However, we warn against drawing automatic policy conclusions based on these figures due to very strong assumptions on which they rest (which may not be met in near future). Finally, following the hypotheses put forward in the literature, we elaborate and attempt to evaluate empirically the potential impact of exchange rate regimes on the magnitude of the HBS effect.
Authored by: Monika Blaszkiewicz, Przemyslaw Kowalski, Łukasz Rawdanowicz, Przemyslaw Wozniak
Published in 2004
Demographic change (driven by the second demographic transition) led to an uncontrolled increase in scale of various social expenditure in the OECD area, especially in continental Europe. Costs of social transfers created fiscal pressure leading to the necessity of tax increases all over Europe, including the New Member States. Employment consequences of emerging higher tax wedge has become the topic of large body of research. However, surprisingly little evidence is known on distribution of that problem across workers. Is the effect of high tax wedge equally spread or certain groups of workers suffer more than others? More specifically, are low productivity workers exposed more to the problems caused by high tax wedge?
Authored by: Marek Gora, Artur Radziwill, Agnieszka Sowa, Mateusz Walewski
Published in 2006
The paper analyses the relationship between labour costs and employment development in manufacturing industry in Poland, Czech Republic and Hungary. It indicates the need for thorough labour cost analysis in Europe in the context low employment rates among New Member States. The steps taken within the framework of the EU's common employment policy emphasise the crucial role of labour costsin enhancing labour demand.
The question raised in this paper is whether the cost of hiring labour is a significant determinant of employment in Polish, Czech and Hungarian manufacturing and is considered in terms of both relative (unit labour costs) and absolute (labour costs per one employee) measures. The study examines the labour costemployment relationship aiming to find out whether it differs significantly between the three countries and between commodity groups in manufacturing industry within each country.
Authored by: Agnieszka Furmanska-Maruszak
Published in 2006
The projection examines impact of demographic changes and changes in health status on future (up to 2050) health expenditures. Next to it, future changes in the labour market participation and their impact on the health care system revenues are examined. Impact of demography on the health care system financial balanced is examined in four different scenarios: baseline scenario, death-related costs scenario, different longevity scenario and diversified employment rates scenario. Results indicate dynamic and systematic increase of the health expenditures in the next 30 years. Afterwards the dynamics of this process is foreseen to slow down. Despite the increase of the revenues of the health care system, the system will face deficit in the close future. This holds for each scenario, however the size of the deficit differs depending on longevity and labour market participation assumptions. Results lead to a discussion on possible reforms of the health care system.
Authored by: Stanislawa Golinowska, Ewa Kocot, Agnieszka Sowa
Published in 2008
There is a large body of literature on the relationship between innovations and employment at the firm level, with most of the results indicating positive effects. Thus far, this kind of analysis has not been performed for Poland and it seems to be an important and interesting field for research. On the other hand, there is some empirical evidence that developments in the Polish labour market are at least partially driven by the Skill Biased Technical Change (SBTC) process. This paper tries to fill in this gap by looking at three dimensions of the relationship between innovations and employment in Poland: innovations and job creation, innovations and the skill structure of employment innovations, and wage formation. The results of the analysis indicate that there is a weak but positive relationship between the level of innovations and the probability of job creation. However, we have not been able to prove that innovations have any effect on the skill structure of labour demand in Poland. We have however found a positive and statistically significant relationship between the level of innovations and skill-biased wage changes. The results indicate that innovations positively influence the wages of skilled workers while they negatively influence the wages of the unskilled.
Authored by: Mateusz Walewski
Published in 2009
The paper attempts to identify indirectly vertical product differentiation in three industries of Polish manufacturing (manufacture of glass and glass products, manufacture of other general purpose machinery and manufacture of other special purpose machinery) by examining how focus on a given group of customers (segment) is related to company characteristics. Changes in companies' segment orientation between 2002 and 2005 are examined and the factors of these changes are discussed. The analysis is based on a survey of 77 companies.
The data support the hypothesis that there exist segments in the consumer goods market, defined by the income level of customers. In the capital goods market, it is shown that domestic-owned customers are the low-end segment of the market, whereas foreign-owned customers constitute a higher segment. It seems that industries producing capital goods have shifted towards higher market segments between 2002 and 2005 and their principal motive was the pressure exerted by competitors, both domestic and foreign.
Authored by: Iga Magda, Krzysztof Szczygielski
Published in 2006
Endogenous growth theory assigns an important role for entrepreneurship in the process of economic development. This paper sets to formally test the impact of entrepreneurship on economic growth. Entrepreneurship is represented by a number of proxy variables, whereas Total Factor Productivity is used as a measure of economic growth. Panel data of 26 European countries repeatedly sampled over a period of 11 years is used to estimate a Random Effects model. This study finds that entrepreneurship contributes to growth moderately. It is not, nonetheless, a dominant force shaping changes in TFP growth rates. Business Birth Rate, Self-employment Rate, Business Investment and Labour Productivity
Growth were all found to be highly significant. The article concludes that more encompassing measure of entrepreneurship needs to be developed, one that would reflect the complexity of the notion.
Authored by: Andrzej P. Dabkowski
Published in 2011
The paper discusses the challenges of the collaborative economy as a system stimulating female social and economic empowerment and assesses the opportunities offered by the collaborative economy in increasing the female labour participation rate amongst Polish women.
In this paper the author presents a general assessment of the labour market situation of older workers in the Czech Republic, starting with a more general overview of the demographic situation and emphasizing the generational differences among the young-old and older cohorts, underlying a number of different problems as well as solutions. Further in the paper she addresses the impact of the recent economic situation on employment levels, showing that the recovery in terms of employment has not yet begun and that the impact on older workers is (at least) two-fold: firstly, for older workers it is very difficult to find a new job once unemployed; secondly, if employed, the pressure on workability and the increasing demands of workplaces may be harder to bear for the older the worker. She describes a National Action Plan Supporting Positive Ageing (2013-2017) and other examples of good and transferable praxes which address some of the active ageing issues in an innovative way.
The second part of this report examines the issues of employability, workability and age-management as perceived by some of the key actors. The report goes into greater detail on the topic of paid work after retirement, which is considered an important part of the Czech economy, despite the fact that the employment of sizable groups of older workers after retirement is undeclared. Self-entrepreneurship and independent work in later life are another realm of employment that is increasing in importance in the Czech economy; however, as consulted experts argue, it is not to be taken as an unproblematic solution to late-life careers. In the last chapter the author turns her attention to the lifelong learning of older workers and to their up-skilling/retraining. In the concluding remarks, she reemphasizes the need to address the heterogeneity of the older workforce, in the sense of age/generational affiliation, health, socio-economic and other characteristics.
Authored by: Lucie Vidovicova
Published in 2014
We investigate possible factors of change in employment between 1998 and 2003 in 220 companies from four industries of Polish manufacturing (food, electronics, automotive and pharmaceuticals), that were subject to an enterprise survey. We also seek to explain the differences in performance among companies. We find that firms that were more competitive and more innovative laid off relatively less workers. Ownership status and history seem to be relevant factors too, as companies that were started as private businesses slightly increased employment, while the state-owned enterprises experienced proportionally the largest employment cuts; as for privatized companies, those taken over earlier performed better in terms of employment than those privatized later. However, econometric analysis of premia of early privatization and foreign ownership showed that only the latter factor played a significantly positive role for companies' revenues, productivity, profitability and the level of wages.
Authored by: Krzysztof Marczewski, Krzysztof Szczygielski
Published in 2006
The aim of this work is to present an in depth understanding of the conceptual framework of active ageing policies, which have been created and implemented in Poland. The discussion of active ageing in employment in Poland started relatively late. The first discussions on the unfavourable situation of elderly employment emerged only in the second half of the 1990s, when the debate on the pension system reform started. While only a few ageing policies were developed at the national level during that time, several interesting initiatives were undertaken at a regional level and in the third sector. They were mostly focused on productive ageing and the problems associated with the economic activation of people over 50. The intensive implementation of the active ageing policies in Poland started in 2012, during the European Year of Active Ageing. At present, there is an intense discussion on policies addressed to the elderly, which concentrate not only on the activation of the labour market, but also on healthy, active and socially inclusive ageing, education andcivil engagement.
This paper concludes that despite intense work being done by public authorities, the concept still needs a deeper implementation - especially at the regional level. Furthermore, close observation and evaluation of the activation programmes is still missing and the identification and implementation of good practices which are already being developed in other European countries is under-used.
Authored by: Izabela Styczynska
Downward Nominal and Real Wage Rigidity in the Netherlands (MSc. Thesis)Wouter Verbeek
During the Great Recession companies were confronted with decreasing demand. One possible strategy to survive instead of cutting down employment, could be to reduce wages. However, it is well known that workers may tend to be reluctant to accept nominal or real wage cuts. In this thesis the amount of downward wage rigidity in the Netherlands is studied. Although substantial research has been performed in recent years, accurate estimates for the Netherlands are currently not available. All previous studies for The Netherlands are outdated (the most recent data is up till 2001) or use survey or aggregated data, while wage rigidity is best studied using administrative data on individual wages to avoid measurement error and the masking of wage cuts of one group of workers by wage increases of others. In this thesis wage rigidity is estimated using administrative data at the individual level.
The most notorious problem in estimating wage rigidity is measurement error. Measurement error will lead to spurious (and sometimes negative) wage changes, which could lead to an underestimate of the amount of rigidity. Therefore three methods are used, two of which correct for measurement error. These are the three main approaches well known from the literature that have been developed especially to measure wage rigidity. Also the use of administrative data helps to limit measurement error. Besides presenting up to date estimates of wage rigidity for the Netherlands, this thesis also analyses the determinants of wage rigidity and offers a comparison between three main approaches for estimating wage rigidity. The results of the three methods are found to differ substantially. Estimates for the fraction of wages covered by real wage rigidity range from 10 % up to 67 %. The results of the preferred model-based IWFP method indicate that the amount of real and nominal wage rigidity is about average compared to other countries. Furthermore, my analysis of the determinants of Dutch wage rigidity shows that the presence of wage rigidity is unevenly distributed among groups of workers. I find that DNWR and DRWR are positively related to a higher age, higher education, open-end contracts, full-time contracts and to working in a firm that experienced zero or positive employment growth in the previous year. Furthermore I find that large companies have less nominal wage rigidity than small and middle-sized companies, while showing more real wage rigidity. In addition, people with a higher wage show a higher degree of real wage rigidity. I have indications that people working in a shrinking sector province combination are to some extend willing to accept real wage cuts in favor of employment. I also find that the amount of real wage rigidity decreases and nominal rigidity increases in a low inflation environment.
The aim of this paper is to examine the issues of gender disparities in the Commonwealth of Independent States (CIS) region, with a special focus given to countries covered by the European Neighbourhood Policy (ENP). The analysis is conducted in several dimensions: labour participation, economic opportunity, political empowerment, educational attainment, and health and demography. Beside the comparative study of "in region differentials" done for the CIS, I analyze the trends in gender disparities in comparison to EU-12 and EU-15, using data for the period 1985-2005.
The study confirms the existence of slightly different paths in which gender disparities have evolved over time. While in EU-15 women participation in labour market, their remuneration, and position in public life have significantly increased, in majority of the CIS countries a gradual decrease of female labour activity was reported. In addition female representation in politics and public life has shrunken after and during the transition period. On the other hand in such fields as secondary and tertiary education attainment, health, and demography male population in the CIS region has became more disadvantaged, which also leads to enlarging gender gap.
Authored by: Magdalena Rokicka
Published in 2008
This paper investigates an impact of the government policies aimed at the enterprise sector on competitiveness of this sector. The analysis was based on an example of the Polish manufacturing sector and the eight-year period from 1996 to 2003.
The general recommendation is that the competitiveness of the Polish manufacturing sector could be increased by relaxing fiscal burden, further privatization and restructuring of state owned companies. The state aid in a form of subsidies seems to harm both internal and external competitiveness rather than to support them.
Authored by: Ewa Balcerowicz, Maciej Sobolewski
Published in 2005
This paper uses obstacles to innovation to investigate the heterogeneity of Polish innovating firms. Based on the frequency with which they introduce innovations, and using data from both CIS4 (for 2002-2004) and CIS5 (2004-2006), the paper distinguishes between two groups of innovating firms: those which introduced innovation in both periods covered by both CIS (called persistent innovators) and those which introduced innovation either in CIS4 or CIS5 (occasional innovators). Two steps analysis covering probit and biprobit models is introduced. The paper shows there is a discrepancy between the number of actual obstacles to innovation faced by firms and the number of obstacles perceived by managers of firms (subjective obstacles). It argues that the impact of obstacles to innovation on the innovation activities of occasional innovators differs from that of persistent ones. Obstacles to innovation reveal weaknesses in the innovation activities of persistent innovators. In the case of occasional innovators, some obstacles prevent firms from introducing innovation. The paper supports the view that the way firms innovate and the frequency with which they use knowledge resources is linked to the obstacles to innovation they face and their impact on innovation activities.
Authored by: Marek Pęczkowski, Anna Wziatek-Kubiak
Published in 2010
The report examines the social and economic drivers and impact of circular migration between Belarus and Poland, Slovakia, and the Czech Republic. The core question the authors sought to address was how managing circular migration could, in the long term, help to optimise labour resources in both the country of origin and the destination countries. In the pages that follow, the authors of the report present the current and forecasted labour market and demographic situation in their respective countries as well as the dynamics and characteristics of short-term labour migration flows between Belarus and Poland, Slovakia, and the Czech Republic, concentrating on the period since 2010. They also outline and discuss related policy responses and evaluate prospects for cooperation on circular migration.
Podręcznik został opracowany w celu przekazania trenerom i nauczycielom podstawowej wiedzy, która może być przydatna w prowadzeniu szkoleń promujących pracę rejestrowaną. Prezentuje on z jednej strony korzyści z pracy rejestrowanej, z drugiej – potencjalne koszty związane z pracą nierejestrowaną. W pierwszej kolejności informacje te przedstawiono w odniesieniu do pracowników najemnych (rozdział 2), podkreślając w sposób szczególny to, że negatywne konsekwencje pracy nierejestrowanej są ponoszone przez całe życie. Ze względu na specyficzną sytuację cudzoziemców pracujących w Polsce konsekwencje ponoszone przez tę grupę opisano oddzielnie (rozdział 3). Ponadto zaprezentowano skutki dotyczące pracodawców z szarej strefy z wyodrębnieniem tych, którzy zatrudniają cudzoziemców (rozdział 4). Uzupełnieniem przedstawionych informacji jest opis działań podejmowanych przez państwo w celu ograniczenia zjawiska pracy nierejestrowanej w Polsce (rozdział 5) oraz prowadzonych w Wielkiej Brytanii, czyli w kraju będącym liderem w walce z szarą strefą (rozdział 6).
European countries face a challenge related to the economic and social consequences of their societies’ aging. Specifically, pension systems must adjust to the coming changes, maintaining both financial stability, connected with equalizing inflows from premiums and spending on pensions, and simultaneously the sufficiency of benefits, protecting retirees against poverty and smoothing consumption over their lives, i.e. ensuring the ability to pay for consumption needs at each stage of life, regardless of income from labor.
One of the key instruments applied toward these goals is the retirement age. Formally it is a legally established boundary: once people have crossed it – on average – they significantly lose their ability to perform work (the so-called old-age risk). But since the 1970s, in many developed countries the retirement age has become an instrument of social and labor-market policy. Specifically, in the 1970s and ‘80s, an early retirement age was perceived as a solution allowing a reduction in the supply of labor, particularly among people with relatively low competencies who were approaching retirement age, which is called the lump of labor fallacy. It was often believed that people taking early retirement freed up jobs for the young. But a range of economic evidence shows that the number of jobs is not fixed, and those who retire don’t in fact free up jobs. On the contrary, because of higher spending by pension systems, labor costs rise, which limits the supply of jobs. In general, a good situation on the labor market supports employment of both the youngest and the oldest labor force participants. Additionally, a lower retirement age for women was maintained, which resulted to a high degree from cultural conditions and norms that are typical for traditional societies.
Until now, the banking sector has been one of the strong points of Poland’s economy. In contrast to banks in the U.S. and leading Western European economies, lenders in Poland came through the 2008 global financial crisis without a scratch, without needing state financial support. But in recent years the industry’s problems have been growing, creating a threat to economic growth and gains in living standards.
For an economy’s productivity to increase, funds can’t go to all companies evenly, and definitely shouldn’t go to those that are most lacking in funds, but to those that will use them most efficiently. This is true of total external financing, and thus funding both from the banking sector and from parabanks, the capital market and funds from public institutions. In Poland, in light of the relatively modest scale of the capital market, banks play a clearly dominant role in external financing of companies. This is why the author of this text focuses on the bank credit allocation efficiency.
The author points out that in the very near future, conditions will emerge in Poland which – as the experience of other countries shows – create a risk of reduced efficiency of credit allocation to business. Additionally, in Poland today, bank lending to companies is to a high degree being replaced by funds from state aid, which reduces the efficiency of allocation of external funds to companies (both loans and subsidies), as allocation of government subsidies is not usually based on efficiency. This decline in external financing allocation efficiency may slow, halt or even reverse the process, that has been uninterrupted for 28 years, of Poland’s convergence, i.e. the narrowing of the gap in living standards between Poland and the West.
The economic characteristics of the COVID-19 crisis differ from those of previous crises. It is a combination of demand- and supply-side constraints which led to the formation of a monetary overhang that will be unfrozen once the pandemic ends. Monetary policy must take this effect into consideration, along with other pro-inflationary factors, in the post-pandemic era. It must also think in advance about how to avoid a policy trap coming from fiscal dominance.
This paper is organized as follows: Chapter 2 deals with the economic characteristics of the COVID-19 pandemic and its impact on the effectiveness of the monetary policy response measures undertaken. In Chapter 3, we analyse the monetary policy decisions of the ECB (and other major CBs for comparison) and their effectiveness in achieving the declared policy goals in the short term. Chapter 4 is devoted to an analysis of the policy challenges which may be faced by the ECB and other major CBs once the pandemic emergency comes to its end. Chapter 5 contains a summary and the conclusions of our analysis.
The rule of law, by securing civil and economic rights, directly contributes to social prosperity and is one of our societies’ greatest achievements. In the European Union (EU), the rule of law is enshrined in the Treaties of its founding and is recognised not just as a necessary condition of a liberal democratic society, but also as an important requirement for a stable, effective, and sustainable market economy. In fact, it was the stability and equality of opportunity provided by the rule of law that enabled the post-war Wirtschaftswunder in Germany and the post-Communist resuscitation of the economy in Poland.
But the rule of law is a living concept that is constantly evolving – both in its formal, de jure dimension, embodied in legislation, and its de facto dimension, or its reception by society. In Poland, in particular, according to the EU, the rule of law has been heavily challenged by government since 2015 and has evolved amid continued pressure exerted on the institutions which execute laws. More recently, the outbreak of the COVID-19 pandemic transformed the perception of the rule of law and its boundaries throughout the EU and beyond (Marzocchi, 2020).
This Study contains Value Added Tax (VAT) Gap estimates for 2018, fast estimates using a simplified methodology for 2019, the year immediately preceding the analysis, and includes revised estimates for 2014-2017. It also includes the updated and extended results of the econometric analysis of VAT Gap determinants initiated and initially reported in the 2018 Report (Poniatowski et al., 2018). As a novelty, the econometric analysis to forecast potential impacts of the coronavirus crisis and resulting recession on the evolution of the VAT Gap in 2020 is reported.
In 2018, most European Union (EU) Member States (MS) saw a slight decrease in the pace of gross domestic product (GDP) growth, but the economic conditions for increasing tax compliance remained favourable. We estimate that the VAT total tax liability (VTTL) in 2018 increased by 3.6 percent whereas VAT revenue increased by 4.2 percent, leading to a decline in the VAT Gap in both relative and nominal terms. In relative terms, the EU-wide Gap dropped to 11 percent and EUR 140 billion. Fast estimates show that the VAT Gap will likely continue to decline in 2019.
Of the EU-28, the smallest Gaps were observed in Sweden (0.7 percent), Croatia (3.5 percent), and Finland (3.6 percent), the largest – in Romania (33.8 percent), Greece (30.1 percent), and Lithuania (25.9 percent). Overall, half of the EU-28 MS recorded a Gap above 9.2 percent. In nominal terms, the largest Gaps were recorded in Italy (EUR 35.4 billion), the United Kingdom (EUR 23.5 billion), and Germany (EUR 22 billion).
The euro is the second most important global currency after the US dollar. However, its international role has not increased since its inception in 1999. The private sector prefers using the US dollar rather than the euro because the financial market for US dollar-denominated assets is larger and deeper; network externalities and inertia also play a role. Increasing the attractiveness of the euro outside the euro area requires, among others, a proactive role for the European Central Bank and completing the Banking Union and Capital Market Union.
Forecasting during a strong shock is burdened with exceptionally high uncertainty. This gives rise to the temptation to formulate alarmist forecasts. Experiences from earlier pandemics, particularly those from the 20th century, for which we have the most data, don’t provide a basis for this. The mildest of them weakened growth by less than 1 percentage point, and the worst, the Spanish Flu, by 6 percentage points. Still, even the Spanish Flu never caused losses on the order of 20% of GDP – not even where it turned out to be a humanitarian disaster, costing the lives of 3-5% of the population. History suggests that if pandemics lead to such deep losses at all, it’s only in particular quarters and not over a whole year, as economic activity rebounds. The strength of that rebound is largely determined by economic policy. The purpose of this work is to describe possible scenarios for a rebound in Polish economic growth after the epidemic.
A separate issue, no less important, is what world will emerge from the current crisis. In the face of the 2008 financial crisis, White House Chief of Staff Rahm Emanuel said: “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things that you think you could not do before.” Such changes can make the economy and society function better than before the crisis. Unfortunately, the opportunities created by the global financial crisis were squandered. Today’s task is more difficult; the scale of various problems has expanded even more. Without deep structural and institutional changes, the world will be facing enduring social and economic problems, accompanied by long-term stagnation.
"Many brilliant prophecies have appeared for the future of the EU and our entire planet. I believe that Europe, in its own style, will draw pragmatic conclusions from the crisis, not revolutionary ones; conclusions that will allow us to continue enjoying a Europe without borders. Brussels will demonstrate its usefulness; it will react ably and flexibly. First of all, contrary to the deceitful statements of members of the Polish government, the EU warned of the threats already in 2021. Secondly, already in mid-March EU assistance programs were ready, i.e. earlier than the PiS government’s “shield” program. The conclusion from the crisis will be a strengthening of all the preventive mechanisms that allow us to recognize threats and react in time of need. Research programs will be more strongly directed toward diagnosing and treating infectious diseases. Europe will gain greater self-sufficiency in the area of medical equipment and drugs, and the EU – greater competencies in the area of the health service, thus far entrusted to the member states. The 2021-27 budget must be reconstructed, to supplement the priority of the Green Deal with economic stimulus programs. In this way structural funds, which have the greatest multiplier effect for investment and the labor market, may return to favor. So once again: an addition, as a conclusion from the crisis, and not a reinvention of the EU," writes Dr. Janusz Lewandowski the author of the 162nd mBank-CASE seminar Proceeding.
Dla wielu rodaków europejskość Polski jest oczywista, trudno jest im nawet wyobrazić sobie, jak kształtowałyby się losy naszego kraju bez uczestnictwa w integracji europejskiej. Szczególnie młode pokolenie traktuje osiągnięty przez nas dzięki uczestnictwie w Unii ogromny postęp cywilizacyjny jako coś danego i naturalnego. Jednak świadomość tego, jaki był nasz punkt wyjścia, jaką przeszliśmy drogę i jak przyczyniły się do tego unijne działania oraz jakie wynikały z tego korzyści powinna nam stale towarzyszyć. Bez tej świadomości, starannego weryfikowania faktów i docenienia naszych osiągnięć grozi nam uleganie niesprawdzonym argumentom przeciwników integracji europejskiej i popełnienie nieodwracalnych błędów. Dla tych, którzy chcą poznać te fakty, przygotowany został raport "Nasza Europa. 15 lat Polski w Unii Europejskiej". Podjęto w nim ocenę 15 lat członkostwa Polski z perspektywy doświadczeń procesu integracji, z jego barierami i sukcesami, a także wyzwaniami przyszłości.
Raport jest wynikiem pracy zbiorowej licznych ekspertów z różnych dziedzin, od wielu lat analizujących wielowymiarowe efekty działania instytucji UE oraz współpracy z krajami członkowskimi na podstawie europejskich wartości i mechanizmów. Autorzy podsumowują korzyści członkostwa Polski w Unii Europejskiej na podstawie faktów, nie stroniąc jednakże od własnych ocen i refleksji.
This report is the result of the joint work of a number of experts from various fields who have been - for many years – analysing the multidimensional effects of EU institutions and cooperation with Member States pursuant to European values and mechanisms. The authors summarise the benefits of Poland’s membership in the EU based on facts; however, they do not hide their own views and reflections. They also demonstrate the barriers and challenges to further European integration.
This report was prepared by CASE, one of the oldest independent think tanks in Central and Eastern Europe, utilising its nearly 30 years of experience in providing objective analyses and recommendations with respect to socioeconomic topics. It is both an expression of concern about Poland’s future in the EU, as well as the authors’ contribution to the debate on further European integration.
Belarus was among the few post-communist countries to resign from comprehensive market reforms and attempt to improve the efficiency of the economy through administrative means, leaving market mechanisms only an auxiliary role. Since its inception, the ‘Belarusian economic model’ has undergone several revisions of a de-statisation and de-regulation kind, but still the Belarusian economy remains dominated by the state. This paper analyses the characteristic features of the Belarusian economic system – especially those related to the public sector – as well as its evolution over time during the period following its independence. The paper concludes that during the post-Soviet period, the Belarusian economy evolved from a quasi-Soviet system based on state property, state planning, support to inefficient enterprises and the massive redistribution of funds to a more flexible hybrid model where the public sector still remains the core of the economy. The case of Belarus shows that presently there is no appropriate theoretical perspective which, in an unmodified form, could be applied to study this type of economic system. Therefore, a new perspective based on an already existing but updated approach or a multidisciplinary approach that incorporates the duality of the Belarusian economy is required.
Belarusian economy has been stagnating in 2011-2015 after 15 years of a high annual average growth rate. In 2015, after four years of stagnation, the Belarusian economy slid into a recession, its first since 1996, and experienced both cyclical and structural recessions. Since 2015, the Belarusian government and the National Bank of Belarus have been giving economic reforms a good chance thanks to gradual but consistent actions aimed at maintaining macroeconomic stability and economic liberalization. It seems that the economic authorities have sustained more transformation efforts during 2015-2018 than in the previous 24 years since 1991.
As the relative welfare level in Belarus is currently 64% compared to the Central and Eastern Europe (CEE) countries average, Belarus needs to build stronger fundaments of sustainable growth by continuing and accelerating the implementation of institutional transformation, primarily by fostering elimination of existing administrative mechanisms of inefficient resource allocation. Based on the experience of the CEE countries’ economic transformation, we highlight five lessons for the purpose of the economic reforms that Belarus still faces today: keeping macroeconomic stability, restructuring and improving the governance of state-owned enterprises, developing the financial market, increasing taxation efficiency, and deepening fiscal decentralization.
Inflation in advanced economies is low by historical standards but there is no threat of deflation. Slower economic growth is caused by supply-side constraints rather than low inflation. Below-the-target inflation does not damage the reputation of central banks. Thus, central banks should not try to bring inflation back to the targeted level of 2%. Rather, they should revise the inflation target downwards and publicly explain the rationale for such a move. Risks to the independence of central banks come from their additional mandates (beyond price stability) and populist politics.
Estonia has Europe’s most transparent tax system (while Poland is second-to-last, in 35th place), and is also known for its pioneering approach to taxation of legal persons’ income. Since 2000, payers of Estonian corporate tax don’t pay tax on their profits as long as they don’t realize them. In principle, this approach should make access to capital easier, spark investment by companies and contribute to faster economic growth. Are these and other positive effects really noticeable in Estonia? Have other countries followed in this country’s footsteps? Would deferment of income tax be possible and beneficial for Poland? How would this affect revenue from tax on corporate profits? Would investors come to see Poland as a tax haven? Does the Estonian system limit tax avoidance and evasion, or actually the opposite? Is such a system fair? Are intermediate solutions possible, which would combine the strengths or limit the weaknesses of the classical and Estonian models of profit tax? These questions are discussed in the mBank-CASE seminar Proceeding no. 163, written by Dmitri Jegorov, deputy general secretary of the Estonian Finance Ministry, who directs the country’s tax and customs policy, Dr. Anna Leszczyłowska of the Poznań University of Economics and Business and Aleksander Łożykowski of the Warsaw School of Economics.
The trade war between the U.S. and China began in March 2018. The American side raised import duties on aluminum and steel from China, which were later extended to other countries, including Canada, Mexico and the EU member states. This drew a negative reaction from those countries and bilateral negotiations with the U.S. In June 2018 America, referring to Section 301 of its 1974 Trade Act, raised tariffs to 25% on 818 groups of products imported from China, arguing that the tariff increase was a response to years of theft of American intellectual property and dishonest trade practices, which has caused the U.S. trade deficit.
Will this trade war mean the collapse of the multilateral trading system and a transition to bilateral relationships? What are the possibilities for increasing tariffs in light of World Trade Organization rules? Can the conflict be resolved using the WTO dispute-resolution mechanism? What are the consequences of the trade war for American consumers and producers, and for suppliers from other countries? How high will tariffs climb as a result of a global trade war? How far can trade volumes and GDP fall if the worst-case scenario comes to pass? Professor Jan J. Michałek and Dr. Przemysław Woźniak give answers to these questions in the mBank-CASE Seminar Proceeding No. 161.
This Report has been prepared for the European Commission, DG TAXUD under contract TAXUD/2017/DE/329, “Study and Reports on the VAT Gap in the EU-28 Member States” and serves as a follow-up to the six reports published between 2013 and 2018.
This Study contains new estimates of the Value Added Tax (VAT) Gap for 2017, as well as updated estimates for 2013-2016. As a novelty in this series of reports, so called “fast VAT Gap estimates” are also presented the year immediately preceding the analysis, namely for 2018. In addition, the study reports the results of the econometric analysis of VAT Gap determinants initiated and initially reported in the 2018 Report (Poniatowski et al., 2018). It also scrutinises the Policy Gap in 2017 as well as the contribution that reduced rates and exemptions made to the theoretical VAT revenue losses.
The paper discusses the role of the state in shaping an economic system which is, in line with the welfare economics approach, capable of performing socially important functions and achieving socially desirable results. We describe this system through a set of indexes: the IHDI, the World Happiness Index, and the Satisfaction of Life index. The characteris-tics of the state are analyzed using a set of variables which describe both the quantitative (government size, various types of governmental expenditures, and regulatory burden) and qualitative (institutional setup and property rights protection) aspects of its functioning. The study examines the “old” and “new” member states of the European Union, the post-communist countries of Eastern Europe and Asia, and the economies of Latin America. The main conclusion of the research is that the institutional quality of the state seems to be the most important for creation of a socially effective economic system, while the level of state interventionism plays, at most, a secondary and often negligible role. Geographical differentiation is also discovered, as well as the lack of a direct correlation between the characteristics of an economic system and the subjective feeling of well-being. These re-sults may corroborate the neo-institutionalist hypothesis that noneconomic factors, such as historical, institutional, cultural, and even genetic factors, may play an important role in making the economic system capable to perform its tasks; this remains an area for future research.
EuroPACE is an innovative financial mechanism inspired by an American building improvement initiative called Property Assessed Clean Energy (PACE). The innovative character of the EuroPACE mechanism is that financing through EuroPACE is linked to the taxes paid on a property. In other words, the financing lent by a private investor is repaid through property taxes and other charges related to the buildings. EuroPACE is therefore in line with the EC’s objectives of (1) putting EE first, (2) contributing to the EU’s global leadership, and (3) empowering consumers to enable MS to reach their energy and climate targets for 2030. Last but not least, EuroPACE could contribute to the democratisation of the energy supply by offering cash-flow positive, decentralised EE solutions.
The EuroPACE mechanism engages several stakeholders in the process: local government, investors, equipment installers, and homeowners. To establish the EuroPACE programme, several conditions must be satisfied, each of which are relevant for different stakeholder at different stages of the implementation. For the purpose of this report, we divided these criteria into two categories: key criteria, which make the implementation possible, and complementary criteria, which make the implementation easier. For the time being, it is a pure hypothesis to be tested with potential EuroPACE implementation.
More from CASE Center for Social and Economic Research (20)
how can I sell my pi coins for cash in a pi APPDOT TECH
You can't sell your pi coins in the pi network app. because it is not listed yet on any exchange.
The only way you can sell is by trading your pi coins with an investor (a person looking forward to hold massive amounts of pi coins before mainnet launch) .
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The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
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1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
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4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
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As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
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4. CASE Working Paper | No 1 (2015)
4
Author
Jacek Liwiński – assistant professor of economics at the University of Warsaw, Faculty
of Economic Sciences, senior economist at CASE - Center for Social and Economic
Research, research fellow of the Global Labor Organization (GLO). His research has focused
on labor economics, education economics, and evaluation of public education programs.
Address: ul. Długa 44/50, 00-241 Warsaw, Poland. E-mail: jliwinski@wne.uw.edu.pl.
5. CASE Working Paper | No 1 (2015)
5
Abstract
Purpose: This paper tries to identify the wage gap between informal and formal workers
and tests for the two-tier structure of the informal labour market in Poland.
Design/methodology/approach: I employ the propensity score matching (PSM) technique
and use data from the Polish Labour Force Survey (LFS) for the period 2009–2017 to estimate
the wage gap between informal and formal workers, both at the means and along the
wage distribution. I use two definitions of informal employment: a) employment without
a written agreement and b) employment while officially registered as unemployed
at a labour office. In order to reduce the bias resulting from the non-random selection of
individuals into informal employment, I use a rich set of control variables representing
several individual characteristics.
Findings: After controlling for observed heterogeneity, I find that on average informal
workers earn less than formal workers, both in terms of monthly earnings and hourly
wage. This result is not sensitive to the definition of informal employment used and is
stable over the analysed time period (2009–2017). However, the wage penalty to informal
employment is substantially higher for individuals at the bottom of the wage distribution,
which supports the hypothesis of the two-tier structure of the informal labour market in Po-
land.
Originality/value: The main contribution of this study is that it identifies the two-tier
structure of the informal labour market in Poland: informal workers in the first quartile of
the wage distribution and those above the first quartile appear to be in two partially different
segments of the labour market.
6. CASE Working Paper | No 1 (2015)
6
Informal or undeclared work is usually understood as performing a job without paying
taxes and social security contributions. But when it comes to the details, there are many
different definitions and methods of measurement used to examine this phenomenon.
Correspondingly, the level of undeclared employment is assessed differently depending
on the definition used. Williams et al. (2017) used the Labour Input Method (LIM) and esti-
mated the average level of undeclared employment among the European Union (EU) member
states at 7.7% of the total labour input. Interestingly, they found that the country most
affected by undeclared employment among the 27 EU economies was Poland (14.4%).
Another source of data is the Eurobarometer survey, where undeclared employment is
measured as the share of individuals who report to work in the grey sector. The EU average
of this share amounted to 4% in 2013 and 3% in 2019 (European Commission, 2014, 2020).
Poland, with shares of 3% and 1%, respectively, was below the EU averages in both survey
years. The undeclared employment level is also monitored in Poland by Statistics Poland
(GUS) on the basis of a special module added to the Labour Force Survey (LFS). The results
of this survey show that undeclared employment amounted to 4.5-4.9% of total employment
in the period 2009–2017.
In fact, three parties are involved in undeclared work – the customers willing to buy
goods and services produced in the grey economy because they are cheaper, the employers
willing to hire workers informally in order to reduce labour costs, and the employees willing
to work without a formal contract. As for the employees, they generally have two reasons
to work informally. First, they may believe they will earn more when employed informally
because they will not have to pay income tax. Second, they may agree to work without
a formal contract if they are not able to find a job in the formal sector. These two reasons
correspond with the “exit” and “exclusion” hypotheses that explain the determinants of in-
formal employment. The “exit” hypothesis is based on the assumption that some individuals
leave the formal sector of employment in order to increase their net earnings by avoiding
taxes (Maloney, 2004; Perry et al., 2007). The “exclusion” hypothesis explains that unde-
clared work is a form of inferior employment, which is characterised by low wages, insecurity,
and poor working conditions (Harris and Todaro, 1970; Loyaza, 1994; Perry et al., 2007).
Introduction
7. CASE Working Papers | No. 14 (138) / 2020
7
As both of these causes of informal employment may be in play at the same time, on the-
oretical grounds it is not clear whether one should expect informal workers to earn more
or less than those in the formal sector. The empirical evidence is also not conclusive. For
Poland, there have been three studies conducted thus far, and they provide all three
possible answers. They show that informal workers earn higher wages (Tyrowicz and
Cichocki, 2011), lower wages (Cichocki and Tyrowicz, 2010a), or the same wages (Cichocki
and Tyrowicz, 2010b), when compared to formally employed individuals.
The aim of this paper is to shed more light on this issue by using more recent and rich-
er data for Poland. The Polish LFS dataset for the period 2009–2017 allows me to use two
definitions of informal employment: a) employment without a written agreement and b)
employment and official registration as unemployed at the same time. I use both the OLS
and PSM methods to estimate the effect of being employed informally on monthly earnings,
hourly wage, and working time. I find that informal workers – regardless of the definition
used – earn on average lower monthly and hourly wages in the period 2009–2017. But the
wage penalty to informal employment is substantially higher for individuals at the bottom
of the wage distribution, which supports the hypothesis of the two-tier structure of the
informal labour market in Poland.
This study contributes to the literature in at least two ways. First, when compared to the
existing studies by Cichocki and Tyrowicz, this study provides a more in-depth analysis (using
two definitions of informal employment and a richer set of control variables) based on more
recent data (2009–2017) and reaches qualitatively different results on the wage gap be-
tween informal and formal workers in Poland. Second, this is one of only a few studies in the
literature – and the first for Poland – that tries to test for the hypothesis of the two-tier
structure of the informal labour market.
This paper is structured into five sections. In the first section, I present the theoretical
and empirical literature. The second section presents the data, the third one – the meth-
odology, and the fourth one – the results of the empirical analysis of the effects of working
informally on monthly earnings and hourly wage in Poland. The paper ends with a summary
that contains the most important conclusions.
8. CASE Working Paper | No 1 (2015)
8
The theoretical literature suggests that individuals may have two basic reasons for work-
ing informally. First, they may believe that they will earn more when employed informally
because they will not have to pay income tax. Second, they may agree to work informal-
ly if they cannot find a job in the formal sector. These two arguments were formalised in
the theoretical literature as the “exit” and “exclusion” hypotheses (Maloney, 2004; Perry
et al., 2007; Arias and Khamis, 2008). The exit hypothesis is based on the assumption that
individuals choose informal employment to avoid paying taxes and earn more than the
net-of-tax wage in the formal sector. The exclusion hypothesis explains that individuals
choose to work informally even if their wage in the informal sector is lower than the net-of-
tax wage in the formal sector because they cannot find a job in the formal sector. Exclusion
from formal employment may result from an individual’s low productivity when compared
to the minimum wage or the efficiency wage, from the activity of trade unions, or from
discrimination based on the individual’s characteristics. The exclusion hypothesis is thus
closely related to the segmentation hypothesis, which assumes that the labour market is
divided into two sectors – the primary sector, which is characterised by high wages and
stable employment, and the secondary sector, where wages are low and employment is un-
stable (Doeringer and Piore, 1971; Leontaridi, 1998). The two segments co-exist because
– for some reasons, like an individual’s characteristics – it is difficult (costly) or impossible
for individuals to move from one sector to the other. From this point of view, the infor-
mal sector may be regarded as the secondary or inferior sector of the labour market, with
low wages, lack of stability, and poor working conditions (Loyaza, 1994; Perry et al., 2007).
Informal workers would like to move to the formal sector, but they cannot do it because
of their education, age, gender, or place of residence.
In addition to the above-mentioned two opposite views, there is a third one that com-
bines them. This third view emphasises that the informal sector is highly heterogeneous in its
nature and consists of two tiers – an upper tier including those who are voluntarily informal
and a lower tier including those who cannot afford to be unemployed but who also cannot
find a formal job (Fields, 1990). Accordingly, wages in the upper tier should be higher than
1. Review of literature
9. CASE Working Papers | No. 14 (138) / 2020
9
in the formal sector (in line with the exit hypothesis) and wages in the lower tier should
be lower than in the formal sector (in line with the exclusion hypothesis).
As for the empirical evidence, most of the early studies support the exclusion hypothesis
by showing that informal workers earn less at the mean than those working in the formal
sector (Heckman and Hotz, 1986; Pradhan and van Soest, 1995; Tansel, 1997; Gong and van
Soest, 2002; Arias and Khamis, 2008; Badaoui et al., 2008; Blunch, 2015). There are also
a number of studies that provide evidence supporting the two-tier structure of the infor-
mal sector. These are based on two methodologies. Most of these studies use the quantile
regression (QR) to test for the heterogeneity of the informal sector wage penalty along
the wage distribution. Evidence showing a larger wage penalty in the lower part of the wage
distribution is viewed as proof of the two-tier informal sector (Tannuri-Pianto and Pianto,
2002; Botelho and Ponczek, 2011; Lehmann and Zaiceva, 2013). But there are also a few
studies using this method that do not find evidence supporting this hypothesis (Nguyen
et al., 2013; Bargain and Kwenda, 2014; Staneva and Arabsheibani, 2014; Tansel et al.,
2020). Another approach is to use information on the voluntary or involuntary nature
of a respondent’s informal employment, as the two-tier hypothesis assumes that the former
will earn higher wages than formal workers and the latter will earn lower wages (Lehmann
and Pignatti, 2018).
In order to properly identify the wage gap between informal and formal workers, one
needs to address a possible bias resulting from the non-random selection of individuals
into informal employment. Cross-sectional studies using OLS ignore unobservable
characteristics and thus may suffer from omitted variable bias if unobservable worker
characteristics simultaneously determine the sector choice and wages. This possibility pre-
cludes the causal interpretation of OLS estimates. Therefore, authors use other estimation
techniques to address this problem.
One widely used strategy was to employ cross-sectional data and the Heckman two-
stage correction procedure (Magnac, 1991; Tansel, 2000, 2002; Carneiro and Henley, 2001;
Gong and van Soest, 2002; Arias and Khamis, 2008). The problem with this method is that
it requires suitable instruments – that is, variables that are determinants of employment
in the informal sector in the first stage equation but that are not correlated with wages
and thus may be excluded from the wage equation in the second stage. If the instruments
used are not strong predictors of informal sector choice, their suitability may be questioned.
Another solution, used recently in a few studies, is to employ panel data and estimate
a fixed effect (FE) model. This method deals with the possible bias resulting from the selection
on unobservables, provided that the unobserved individuals’ characteristics are time-invari-
ant. These studies find that the informal sector wage penalty gets smaller when compared
to the OLS estimation (Botelho and Ponczek, 2011; Nguyen et al., 2013; Bargain and Kwenda,
10. CASE Working Papers | No. 14 (138) / 2020
10
2014; Tansel and Kan, 2016; Tansel et al., 2020), or that the penalty completely disappears
(Pratap and Quintin, 2006; Badaoui et al., 2008; Nordman et al., 2016).
Another recent approach is to use the propensity score matching (PSM) technique with
cross-sectional or panel data (Calderón-Madrid, 1999; Pratap and Quintin, 2006; Badaoui et
al., 2008; Cichocki and Tyrowicz, 2010a, 2010b; Tyrowicz and Cichocki, 2011; Bargain and
Kwenda, 2014). This method deals with possible misspecifications that may occur due to the
linearity assumption on the covariates.
Most of the empirical literature on the wage gap between informal and formal work-
ers comes from developing countries, like Argentina (Pratap and Quintin, 2006; Arias and
Khamis, 2008), Brazil (Carneiro and Henley, 2001; Tannuri-Pianto and Pianto, 2002; Henley
et al., 2009; Botelho and Ponczek, 2011), Colombia (Magnac, 1991), Côte d’Ivoire (Günther
and Launov, 2012), Egypt (Tansel et al., 2020), Madagascar (Nordman et al., 2016), Mexico
(Gong and van Soest, 2002), South Africa (Badaoui et al., 2008), or Turkey (Tansel, 2000,
2002; Tansel and Kan, 2016). There are also a few studies on the post-Soviet states –
Russia (Lehmann and Zaiceva, 2013), Ukraine (Lehmann and Pignatti, 2018), Tajikistan
(Staneva and Arabsheibani, 2014), and the Baltic states (Meriküll and Staehr, 2010). As for
Central and Eastern European countries, to the best of my knowledge, there are only studies
for Poland (Cichocki and Tyrowicz, 2010a, 2010b; Tyrowicz and Cichocki, 2011). These last
three studies are most closely related to my research.
Cichocki and Tyrowicz (2010a) use the PSM technique and cross-sectional data from
a survey conducted in 2007 by the Ministry of Labour and Social Affairs of Poland on
a sample of approximately 19,000 individuals. Their definition of informal workers includes
individuals employed without a written employment agreement and those whose earnings
were not declared to the social security and tax authorities. They estimate propensity scores
based on a relatively small set of explanatory variables representing workers’ characteristics,
including gender, age, education, and marital status (and their interactions). They find that
the raw wage gap between formal and informal workers is 29% and it narrows down to 23%
after using the PSM. This outcome is consistent with the exclusion hypothesis.
Cichocki and Tyrowicz (2010b) use the same data and identification strategy as Cichocki
and Tyrowicz (2010a). The only difference between the two studies is that the former uses
a broader definition of informal employment, including not only fully informal employees,
but also partially informal employees – those where a portion of their earnings are not
declared to the social security and tax authorities or whose formal earnings are lower
than their actual ones. Importantly, the total amount of earnings of the partially informal
workers (formal wage + envelope wage) was analysed. Both the raw and PSM estimates show
that there is no wage gap at the mean between informal and formal workers.
11. CASE Working Papers | No. 14 (138) / 2020
11
Tyrowicz and Cichocki (2011) employ the PSM technique and data from the Polish
Labour Force Survey (LFS) for the period 1995–2007. Due to data limitations, they define
informal workers as employed individuals who are officially registered as unemployed at
labour offices. The study finds that the raw wages of informal workers were 30–50%
lower than those of formal workers, but the PSM estimates surprisingly show that these
are informal workers who earn 40–50% more than their formal sector counterparts. Thus,
the results of this study support the exit hypothesis.
In summary, the evidence for Poland is thus far inconclusive. The three studies by Cichoc-
ki and Tyrowicz that use different datasets and different informal employment definitions
provide qualitatively different results. Thus, based on the existing evidence, it is not possi-
ble to conclude which one of the three hypotheses explaining the determinants of informal
employment holds for Poland.
12. CASE Working Paper | No 1 (2015)
12
The analysis is based on cross-sectional data from the Polish LFS for the years 2009–2017.
The LFS is a representative sample survey of Polish residents that is conducted quarterly
by Statistics Poland (GUS). Approximately 50,000 individuals aged 15 years or more are
surveyed every quarter. They provide detailed information on their economic activity, as
well as on a large set of background characteristics[1]. Importantly for this study, in 2009,
a question aimed at identifying informal workers was added to the LFS questionnaire.
Namely, the employed respondents are asked whether they have a written agreement
with their employer. Additionally, the questionnaire includes information on whether
respondents are registered as unemployed at a labour office, which was used by Tyrowicz
and Cichocki (2011) to identify informal workers. Thus, I define informal workers in two alter-
native ways in my study – as:
1. employed individuals without a written agreement with their employer,
2. employed individuals who are officially registered as unemployed at a labour office.
For the purpose of identifying the wage gap between informal and formal workers,
I restricted the sample to employed individuals who reported the amount of their net earn-
ings and their working hours on their main job on the month prior to the survey. In other
wo-rds, I dropped all individuals who were not employed or did not report their earnings
or working hours. Importantly, I also dropped the self-employed, as they are not asked to
report their income in the LFS. I also restricted the sample to individuals at the so-called
productive age, which is 18–59 for women and 18–64 for men, because only this group
was asked to provide information on their unemployment registration status. The sam-
ple size, subject to all of the above restrictions, is 332,183 observations, including 10,054
individuals without a written employment agreement and 2,690 employed individuals who
are registered as unemployed.
2. Data
13. CASE Working Paper | No 1 (2015)
13
While trying to assess the wage gap between informal and formal workers, one needs to
address the problem of possible selection into informal employment. Previous studies for
Poland show that informal workers are indeed different from their formal sector coun-
terparts – undeclared work is more common among men (Beręsewicz and Nikulin, 2018),
low-skilled individuals, those working in small or micro firms, as well as in the construction,
agriculture, or trade sector (Cichocki and Tyrowicz, 2011). Thus, the raw wage gap may
result – at least to some extent – from the fact that formal and informal workers are differ-
ent in terms of various observable and unobservable characteristics. I address this problem
by employing the PSM technique. This method was used in a few recent studies, including the
three above-mentioned studies for Poland (Cichocki and Tyrowicz, 2010a, 2010b; Cichocki
and Tyrowicz, 2011). However, there are four novelties in my approach when compared
to those studies. First, my analysis is based on a more recent data set (2009–2017). Second,
I estimate the wage gap based on two different definitions of informal employment, which
was not possible with the LFS data prior to 2009. Third, I improve the quality of matching
by employing a much larger number of individual characteristics to estimate the propensity
scores. Fourth, I estimate the wage gap not only at the means but also for each quartile along
the wage distribution.
First, as a baseline for my analysis I estimate a wage regression using OLS with robust
standard errors. The wage equation is the following:
where ln wi
is the natural logarithm of the net monthly earnings or the hourly wage rate[2],
INFi
is a dummy variable equal to 1 for informal workers and 0 otherwise, and Xi
is a vec-
tor of the other explanatory variables, including individuals’ demographic, educational, and
employment-related characteristics, as well as controls for place of residence, region,
3. Method
3. Method
While trying to assess the wage gap between informal and formal workers, one
needs to address the problem of possible selection into informal employment. Previous
studies for Poland show that informal workers are indeed different from their formal
sector counterparts – undeclared work is more common among men (Beręsewicz and
Nikulin, 2018), low-skilled individuals, those working in small or micro firms, as well as
in the construction, agriculture, or trade sector (Cichocki and Tyrowicz, 2011). Thus, the
raw wage gap may result – at least to some extent – from the fact that formal and informal
workers are different in terms of various observable and unobservable characteristics. I
address this problem by employing the PSM technique. This method was used in a few
recent studies, including the three above-mentioned studies for Poland (Cichocki and
Tyrowicz, 2010a, 2010b; Cichocki and Tyrowicz, 2011). However, there are four
novelties in my approach when compared to those studies. First, my analysis is based on
a more recent data set (2009-2017). Second, I estimate the wage gap based on two
different definitions of informal employment, which was not possible with the LFS data
prior to 2009. Third, I improve the quality of matching by employing a much larger
number of individual characteristics to estimate the propensity scores. Fourth, I estimate
the wage gap not only at the means but also for each quartile along the wage distribution.
First, as a baseline for my analysis I estimate a wage regression using OLS with
robust standard errors. The wage equation is the following:
ln 𝑤𝑤𝑖𝑖 = 𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖 𝛽𝛽1 + 𝑋𝑋𝑖𝑖 𝛽𝛽2 + 𝜀𝜀𝑖𝑖 (1)
where ln wi is the natural logarithm of the net monthly earnings or the hourly wage rate[2],
INFi is a dummy variable equal to 1 for informal workers and 0 otherwise, and Xi is a
vector of the other explanatory variables, including individuals’ demographic,
educational, and employment-related characteristics, as well as controls for place of
residence, region, and survey year. A complete list of variables included in the wage
equation and descriptive statistics of the sample are presented in Tables A1 and A2,
respectively, in the Appendix.
Second, I employ the PSM technique. This method involves matching informal
workers (treatment group) with individuals having a similar propensity to work in the
informal sector, although they actually work in the formal sector (control group). The
propensity scores are estimated using a probit model on the basis of the same set of
individuals’ and labour market characteristics (Xi) that was used in the OLS estimation.
Thus, I estimate the following equation:
𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖 = 𝑋𝑋𝑖𝑖 𝛽𝛽 + 𝜗𝜗𝑖𝑖 (2)
(1)
14. CASE Working Papers | No. 14 (138) / 2020
14
and survey year. A complete list of variables included in the wage equation and descriptive
statistics of the sample are presented in Tables A1 and A2, respectively, in the Appendix.
.Second, I employ the PSM technique. This method involves matching informal workers
(treatment group) with individuals having a similar propensity to work in the informal sector,
although they actually work in the formal sector (control group). The propensity scores
are estimated using a probit model on the basis of the same set of individuals’ and labour
market characteristics (Xi
) that was used in the OLS estimation. Thus, I estimate the following
equation:
Separate estimations of the model are made for each definition of informal employment.
The full set of estimates based on the first definition of informal employment, that is employ-
ment without a written agreement, is presented in Table A3 in the Appendix.
.Then, I use the nearest neighbour method to match formal and informal workers on
the basis of propensity scores. In order to reduce the standard error of estimation I match
five individuals from the control pool (the group of formal workers) to each individual
in the treatment group (informal workers), which may be referred to as the NN5 matching.
As the size of the control pool is far larger than the treatment group, I use the matching
procedure with replacement – an individual from the control pool may be matched to only
one individual in the treatment group[3].
The key issue in the matching procedure is to obtain a balanced distribution of observable
characteristics of individuals included in the treatment and control groups. As the analysis
covers a relatively long period of time (2009–2017), when substantial changes in the Polish
labour market took place, the matching of observations from different survey years might
result in a bias. Hence, I use a mixed matching pattern – exact matching (1:1) based on
the survey year and NN5 matching based on the propensity to work informally. As a result,
the matched sample is well balanced. In the pooled sample (2009–2017), before matching
the mean values of almost all (68 out of 77) variables in the treatment group and the control
pool were significantly different (at the 5% level), while after matching most of these
differences disappeared (only 24 remained significant). Thus, the formal workers included
in the control group are very similar in terms of their observable characteristics to informal
workers in the treatment group. The quality of matching is also illustrated in Figure A1
in the Appendix, where the standardised percentage bias (Rosenbaum and Rubin, 1985)
and the ratio of the variance of the residuals in the treatment group to the control
group (Rubin, 2001) are presented. This figure clearly shows that both these indicators were
7
number of individual characteristics to estimate the propensity scores. Fourth, I estimate
the wage gap not only at the means but also for each quartile along the wage distribution.
First, as a baseline for my analysis I estimate a wage regression using OLS with
robust standard errors. The wage equation is the following:
ln 𝑤𝑤𝑖𝑖 = 𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖 𝛽𝛽1 + 𝑋𝑋𝑖𝑖 𝛽𝛽2 + 𝜀𝜀𝑖𝑖 (1)
where ln wi is the natural logarithm of the net monthly earnings or the hourly wage rate[2],
INFi is a dummy variable equal to 1 for informal workers and 0 otherwise, and Xi is a
vector of the other explanatory variables, including individuals’ demographic,
educational, and employment-related characteristics, as well as controls for place of
residence, region, and survey year. A complete list of variables included in the wage
equation and descriptive statistics of the sample are presented in Tables A1 and A2,
respectively, in the Appendix.
Second, I employ the PSM technique. This method involves matching informal
workers (treatment group) with individuals having a similar propensity to work in the
informal sector, although they actually work in the formal sector (control group). The
propensity scores are estimated using a probit model on the basis of the same set of
individuals’ and labour market characteristics (Xi) that was used in the OLS estimation.
Thus, I estimate the following equation:
𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖 = 𝑋𝑋𝑖𝑖 𝛽𝛽 + 𝜗𝜗𝑖𝑖 (2)
Separate estimations of the model are made for each definition of informal employment.
The full set of estimates based on the first definition of informal employment, that is
employment without a written agreement, is presented in Table A3 in the Appendix.
Then, I use the nearest neighbour method to match formal and informal workers
on the basis of propensity scores. In order to reduce the standard error of estimation I
(2)
15. CASE Working Papers | No. 14 (138) / 2020
15
substantially reduced as a result of matching, and the ratio of the variance of the residuals
with respect to almost all variables is within the interval [0.8; 1.25], as suggested by Rubin
(2001).
In the final step of the PSM procedure, I estimate the average treatment effect on the
treated (ATT) as the difference between the mean log of monthly earnings or hourly wage
rate in the treatment and control groups. Standard errors are bootstrapped by performing
500 replications.
16. CASE Working Paper | No 1 (2015)
16
The baseline for my analysis are the OLS estimates presented in Table 1, which are
based on the pooled data (2009–2017) and informal employment defined as working with-
out a written agreement[4]. They clearly show that informal workers in Poland earn less
than their formal counterparts, both in terms of their raw wages and after controlling for
their observable characteristics. The raw wage gap, presented in column 1, is substantial and
it amounts to 24.7% of monthly earnings and 22% of the hourly wage rate. Then, in columns
2–8, I gradually add control variables to see which of the individuals’ characteristics explain
the wage gap. I find that the wage gap reduces when variables representing workers’ human
capital and firm characteristics are added to the wage equation. This result is not surpris-
ing as the descriptive statistics of the sample show that informal workers are less educated,
less tenured, and they work in smaller firms, which typically pay lower wages. When the full
set of control variables is included in the model, the wage penalty to informal employment
is reduced to 9.1% of monthly earnings and 5.4% of the hourly wage (see column 8). The fact
that the wage penalty in terms of monthly earnings is higher than in terms of hourly wage
may be a sign of the shorter working time of informal workers. To check this presumption
formally, I regressed working time on the full set of explanatory variables included in the wage
regression (see Table A4 in the Appendix for the full specification). The estimate in column
8 shows that informal workers indeed have shorter working hours than their formal sector
counterparts, but the difference is not substantial – it amounts to less than 1 hour per week.
4. Results
17. CASE Working Papers | No. 14 (138) / 2020
17
Table 1. The effects of employment without a written agreement (OLS estimates, pooled
sample 2009–2017)
Notes: Each coefficient comes from a separate estimation of the model. Each specification
additionally includes survey year. The full set of estimates coming from models presented
in column 8 are reported in Table A4 in the Appendix.
***/**/* stand for 1%, 5% and 10% significance, respectively. Standard errors in brackets.
Source: Author’s own analyses based on unit data from the Polish LFS, 2009–2017.
Another interesting issue is whether the wage penalty to undeclared employment is sta-
ble over the analysed time period (2009–2017). Thus, I estimated the full specification of the
model (column 8 in Table 1) for each survey year separately. The estimates presented in Table
DEPENDENT
VARIABLES
(1) (2) (3) (4) (5) (6) (7) (8)
Earnings (ln)
–0.247*** –0.243*** –0.251*** –0.164*** –0.123*** –0.109*** –0.088*** –0.091***
(0.007) (0.006) (0.006) (0.006) (0.006) (0.006) (0.006) (0.006)
Hourly
wage (ln)
–0.220*** –0.214*** –0.210*** –0.119*** –0.076*** –0.066*** –0.051*** –0.054***
(0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005) (0.005)
Working
time (hours)
0.158 0.058 –0.351*** –0.535*** –0.882*** –0.738*** –0.619*** –0.628***
(0.129) (0.128) (0.125) (0.125) (0.123) (0.123) (0.123) (0.123)
Control
variables
Gender, age,
age square,
civil status
characteristics
yes yes yes yes yes yes yes
Place
of residence,
region
yes yes yes yes yes yes
Education level yes yes yes yes yes
Firm size, firm
ownership,
economic
sector
yes yes yes yes
Occupation yes yes yes
Job tenure, job
tenure square
yes yes
Internship,
trial period
yes
18. CASE Working Papers | No. 14 (138) / 2020
18
2 show that informal workers earn less than formal workers both in terms of monthly earn-
ings and hourly wage in every single year in the analysed period. Both measures of the wage
penalty are quite stable over time, although there seems to be a slight upward trend from
2009 to 2013 and a downward trend afterwards. These trends coincide with similar trends
in the unemployment rate in Poland, which increased from 8.2% in 2009 to 10.3% in 2013
and then declined to 4.9% in 2017 (Statistics Poland, 2018). A possible explanation for these
trends in the wage penalty could be that during economic downturns, it is easier for employ-
ers to cut the wages of informal workers because they are not bound by any written employ-
ment agreement that states the wage rate or the period of employment. However, I will not
attempt to verify this hypothesis in this paper.
Table 2. Effects of employment without a written agreement (OLS estimates)
Note: Each coefficient comes from a separate estimation of the model. The full set of controls
includes all independent variables listed in Table A1 in the Appendix.
***/**/* indicate a 1%, 5%, and 10% significance level, respectively. Standard errors in brackets.
Source: Author’s own analyses based on unit data from the Polish LFS, 2009–2017.
DEPENDENT
VARIABLES
CONTROL
VARIABLES
POOLED,
2009–2017
2009 2010 2011 2012 2013 2014 2015 2016 2017
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Earnings
(ln)
Only
survey
year
–0.247*** –0.179*** –0.251*** –0.241*** –0.254*** –0.281*** –0.244*** –0.255*** –0.263*** –0.236***
(0.007) (0.017) (0.018) (0.017) (0.020) (0.021) (0.016) (0.018) (0.021) (0.027)
Full set
of controls
–0.091*** –0.048*** –0.080*** –0.091*** –0.096*** –0.123*** –0.086*** –0.105*** –0.081*** –0.081***
(0.006) (0.014) (0.015) (0.014) (0.016) (0.019) (0.014) (0.016) (0.018) (0.022)
Hourly
wage
(ln)
Only
survey
year
–0.220*** –0.174*** –0.218*** –0.223*** –0.224*** –0.241*** –0.227*** –0.226*** –0.241*** –0.186***
(0.005) (0.015) (0.014) (0.014) (0.015) (0.016) (0.014) (0.015) (0.018) (0.022)
Full set
of controls
–0.054*** –0.033*** –0.034*** –0.061*** –0.054*** –0.073*** –0.054*** –0.062*** –0.051*** –0.034*
(0.005) (0.012) (0.013) (0.012) (0.014) (0.014) (0.012) (0.013) (0.016) (0.019)
Working
time
(hours)
Only
survey
year
0.158 0.599* –0.199 0.529 0.231 –0.094 0.299 0.038 0.142 –0.180
(0.129) (0.315) (0.316) (0.361) (0.419) (0.434) (0.340) (0.363) (0.368) (0.506)
Full set
of controls
–0.628*** –0.035 –1.047*** –0.300 –0.641 –0.931** –0.679** –0.858** –0.530 –0.488
(0.123) (0.296) (0.299) (0.334) (0.390) (0.420) (0.336) (0.355) (0.358) (0.487)
19. CASE Working Papers | No. 14 (138) / 2020
19
Table 3 presents the results of the PSM estimation, including both the unmatched and
the average treatment effect on the treated (ATT) estimates of the wage gap. As expected,
the unmatched wage differentials, which represent the raw wage penalty to informal
employment, are basically equal to the corresponding OLS estimates[5]. But the main in-
terest should be focused on the matched wage differentials – that is, on the ATT estimates
of the wage penalty – and these should be compared with the OLS estimates coming from
the models with the full set of controls (see Table 2). First, the PSM estimates based on
the pooled data show that informal workers earn 11.7% lower monthly earnings and
a 7.9% lower hourly wage than workers in the formal sector. These wage penalties are
2–3 percentage points higher than those coming from the OLS estimation. Second, when
I estimate the model for single survey years, I find that the wage penalties to undeclared
employment – both in terms of monthly earnings and hourly wage – are persistent over the
entire analysed period (2009–2017). Although there are small variations of these estimates
over time, the estimates are negative and strongly significant in every single survey year.
Some of them are a bit higher, while others are a bit lower than the corresponding OLS
estimates, but altogether I do not find any substantial or systematic differences between
the PSM and OLS estimates. Importantly, the PSM estimates do not confirm the observation
based on the OLS estimates that the wage penalty is correlated with the unemployment rate.
Table 3. Effects of employment without a written agreement (PSM estimates)
Note: ***/**/* indicate a 1%, 5%, and 10% significance level, respectively. Standard errors in
brackets.
Source: Author’s own analyses based on unit data from the Polish LFS, 2009–2017.
DEPENDENT
VARIABLES
CONTROL
VARIABLES
POOLED,
2009–2017
2009 2010 2011 2012 2013 2014 2015 2016 2017
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Earnings
(ln)
Unmatched
–0.247*** –0.175*** –0.242*** –0.224*** –0.231*** –0.259*** –0.222*** –0.245*** –0.256*** –0.225***
(0.005) (0.012) (0.012) (0.012) (0.014) (0.015) (0.012) (0.013) (0.015) (0.017)
ATT
–0.117*** –0.076*** –0.102*** –0.120*** –0.108*** –0.132*** –0.088*** –0.141*** –0.128** –0.131***
(0.007) (0.017) (0.016) (0.017) (0.024) (0.022) (0.018) (0.019) (0.022) (0.024)
Hourly
wage
(ln)
Unmatched
–0.231*** –0.164*** –0.217*** –0.222*** –0.224*** –0.231*** –0.217*** –0.231*** –0.233*** –0.183***
(0.004) (0.045) (0.011) (0.012) (0.015) (0.014) (0.012) (0.013) (0.014) (0.016)
ATT
–0.079*** –0.049*** –0.047*** –0.094*** –0.082*** –0.072*** –0.063*** –0.104*** –0.088** –0.075***
(0.006) (0.015) (0.014) (0.016) (0.020) (0.019) (0.015) (0.015) (0.018) (0.020)
Working
time
(hours)
Unmatched
0.446*** 0.410* 0.047 0.886*** 0.894*** 0.353 0.678*** 0.458** –0.291 –0.143
(0.070) (0.208) (0.198) (0.197) (0.221) 0.241 (0.200) (0.201) (0.219) (0.243)
ATT
–0.700*** –0.430 –1.217*** –0.187 –0.228 –1.267** –0.459 –0.722** –0.669 –0.894*
(0.134) (0.316) (0.338) (0.360) (0.469) (0.540) (0.380) (0.362) (0.457) (0.491)
20. CASE Working Papers | No. 14 (138) / 2020
20
In order to check for the robustness of the above presented results, I re-estimate the
model using a different definition of unregistered employment. Namely, I follow Tyrowicz and
Cichocki (2011) and define informal workers as the employed individuals who are – at the
same time – officially registered as unemployed at a labour office. The rationale for defining
informal employment in this way is that formal workers are not allowed to register at labour
offices and they have no reason to do so, while informal workers may be willing to register
as unemployed in order to be covered by health insurance. But, importantly, some informal
workers may have no incentive to register at labour offices because they may be entitled
to health insurance based on reasons other than registered unemployment. For example,
they may apply for health insurance if their family member (husband, wife, or child) is for-
mally employed. Hence, we should be aware that this definition of undeclared employment
most likely does not cover all informal workers. This may lead to overestimation of the wage
gap. Nevertheless, this definition was used by Tyrowicz and Cichocki (2011) as there was
not any other variable representing informal employment in the Polish LFS at that time.
I use this definition only as a robustness check, as I am aware that my base definition – which
covers individuals who are employed without a written agreement – is a much better measure
of informal employment.
.
Table 4 presents the results of the robustness check that come from the PSM estimation.
As expected, both the unmatched and the ATT estimates of the wage penalty are higher than
those based on the base definition of informal employment (in Table 3). The PSM estimation
on the pooled data (2009–2017) shows that the raw wage penalty to informal employment
amounts to 54% of monthly earnings and 42% of the hourly wage, while the corresponding
ATT estimates are much lower – they amount to 19.0% and 9.7%, respectively. The lower
wage penalty in terms of hourly wage (when compared to the one for monthly wage) may
result from the shorter working time of informal workers (by approximately 2 hours per week).
When we look at the estimates of the wage gap for single years in the period 2009–2017,
we can notice substantial time variation of all the measures of the wage gap. But these
estimates are stable in qualitative terms – for every single survey year, the ATT estimates
of the wage gap between informal and formal workers are negative and strongly statisti-
cally significant. This outcome is at odds with the findings of Tyrowicz and Cichocki (2011),
who show that the raw wage penalty amounts to 40–50% of monthly wages in the peri-
od 1995–2007, but after matching this raw wage gap surprisingly translates into the ATT
wage premium of 40–60%. The results of my study presented in Table 4, which are based
on the same definition of informal employment, are very similar in terms of the raw wage
gap, but entirely different in terms of the ATT wage gap. Importantly, the results shown
in Table 4 are consistent with those in Table 3, which are based on a more reliable definition
of informal employment. Therefore, I am convinced that undeclared workers on average
do not enjoy a wage premium, but they rather incur a wage penalty.
21. CASE Working Papers | No. 14 (138) / 2020
21
Table 4. Effects of employment while registered as unemployed (PSM estimates)
Note: ***/**/* indicate a 1%, 5%, and 10% significance level, respectively. Standard errors in
brackets.
Source: Author’s own analyses based on unit data from the Polish LFS, 2009–2017.
The negative wage gap between informal and formal workers is consistent with the
exclusion hypothesis, which states that individuals agree to work in the informal sector
and earn lower wages because they cannot find a job in the formal sector where wages are
higher. But the coefficients presented in Tables 1–4 are estimated at the means of the wage
distributions, which does not allow to test for the two-tier structure of the informal sector.
Hence, I check for the heterogeneity of the wage penalty along the wage distribution. The
results of this analysis based on the pooled sample are presented in Table 5. I find that only
the individuals in the first quartile of the wage distribution suffer from the informal sector
wage penalty in terms of monthly earnings, which is 13.7% for workers without a written
agreement and 19.1% for those registered as unemployed. Undeclared workers in the second,
third, or fourth quartile of the wage distribution earn on average the same monthly wage
as formal workers. The lower monthly earnings of informal workers in the first quartile
may be partly explained by their shorter working time (by 2–3 hours per week), but still
their hourly wage is 5–6% lower when compared to their counterparts in the formal sector.
Undeclared workers in the second to fourth quartiles also incur a penalty in terms of
hourly wages (1–3%), but they work more than formal workers (by 1–2 hours per week) and
this is why their monthly earnings are on average the same as those of formal workers.
DEPENDENT
VARIABLES
CONTROL
VARIABLES
POOLED,
2009–2017
2009 2010 2011 2012 2013 2014 2015 2016 2017
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Earnings
(ln)
Unmatched
–0.542*** –0.449*** –0.593*** –0.527*** –0.491*** –0.446*** –0.463*** –0.337*** –0.330*** –0.526***
(0.009) (0.029) (0.019) (0.021) (0.024) (0.023) (0.021) (0.031) (0.035) (0.046)
ATT
–0.190*** –0.113*** –0.190*** –0.242*** –0.182*** –0.176*** –0.202*** –0.118** –0.185*** –0.377***
(0.013) (0.042) (0.027) (0.034) (0.036) (0.038) (0.030) (0.049) (0.057) (0.083)
Hourly
wage
(ln)
Unmatched
–0.425*** –0.390*** –0.447*** –0.358*** –0.367*** –0.360*** –0.371*** –0.321*** –0.222*** –0.301***
(0.008) (0.028) (0.018) (0.021) (0.023) (0.023) (0.020) (0.030) (0.030) (0.040)
ATT
–0.097*** –0.084** –0.080*** –0.096*** –0.096*** –0.114*** –0.131*** –0.110*** –0.095** –0.191***
(0.009) (0.034) (0.019) (0.024) (0.024) (0.028) (0.022) (0.037) (0.038) (0.053)
Working
time
(hours)
Unmatched
–2.059*** –0.632 –3.518*** –3.356*** –2.331*** –1.222*** –1.203** 1.040** –1.358** –3.483***
(0.135) (0.491) (0.312) (0.353) (0.394) (0.402) (0.353) (0.511) (0.573) (0,737)
ATT
–1.835*** –0.097 –2.535*** –3.039*** –1.578** –0.928 –1.175 0.412 –1.487 –3.096*
(0.278) (0.869) (0.559) (0.683) (0.792) (0.823) (0.767) (1.154) (1.297) (1.872)
22. CASE Working Papers | No. 14 (138) / 2020
22
Table 5. Effects of informal employment along the wage distribution (PSM estimates of
ATT, pooled sample)
Note: Each coefficient comes from a separate estimation of the model. The full set of controls
includes all independent variables listed in Table A1.
***/**/* indicate a 1%, 5%, and 10% significance level, respectively. Standard errors in brackets.
Source: Author’s own analyses based on unit data from the Polish LFS, 2009–2017.
Overall, it seems that informal workers in the first quartile of the wage distribution and
those above the first quartile are in two partially different segments of the informal labour
market, which supports the two-tier hypothesis. The former suffer from substantially low-
er monthly earnings than formal workers, which is a result of both a lower hourly wage and
a shorter working time, while the latter have the same monthly earnings as formal workers,
as they make up for a slightly lower hourly wage rate with a longer working time. Important-
ly, if I define undeclared workers as those without a written employment agreement, those
in the first quartile incur a higher hourly wage penalty (5.4%) than those above the first
quartile (1.3–3.0%). On the other hand, support for the two-tier hypothesis does not
seem very strong, as individuals above the first quartile incur an hourly wage penalty, while
following Fields (1990), one could expect that informal employment in the upper tier would
be voluntary and hence it would yield a wage premium rather than a wage penalty. In fact,
only Botelho and Ponczek (2011) provide evidence for Brazil that supports this view, as
they find that informal workers in the first two quartiles of the wage distribution incur a
DEPENDENT
VARIABLES
DEFINITION
OF INFORMAL
EMPLOYMENT
TOTAL
QUARTILE OF THE WAGE DISTRIBUTION
Q1 Q2 Q3 Q4
Earnings
(ln)
No written
agreement
–0.117*** –0.137*** 0.003 –0.001 0.003
(0.007) (0.008) (0.002) (0.002) (0.009)
Registered
as unemployed
–0.190*** –0.191*** –0.0002 –0.013** 0.002
(0.013) (0.013) (0.004) (0.005) (0.025)
Hourly
wage
(ln)
No written
agreement
–0.079*** –0.054*** –0.013*** –0.021*** –0.030***
(0.006) (0.007) (0.005) (0.005) (0.009)
Registered
as unemployed
–0.097*** –0.062*** –0.026** –0.030** –0.049*
(0.009) (0.009) (0.010) (0.014) (0.029)
Working
time
(hours)
No written
agreement
–0.700*** –2.081*** 0.947*** 1.060*** 1.710***
(0.134) (0.227) (0.187) (0.227) (0.327)
Registered
as unemployed
–1.835*** –2.714*** 1.223*** 1.040* 2.472***
(0.278) (0.363) (0.438) (0.587) (0.924)
23. CASE Working Papers | No. 14 (138) / 2020
23
wage penalty, while those in the fourth quartile gain a wage premium. My results are more
similar to those of Tannuri-Pianto and Pianto (2002), who find that in Brazil the wage penalty
to informal employment exists over the entire wage distribution, but is higher at the bottom
of the distribution, or to those of Lehmann and Zaiceva (2013), who find that in Russia
informal workers suffer from a wage penalty only as long as they are in the first two quar-
tiles of the wage distribution. To the best of my knowledge, these are the only studies that
confirm the two-tier hypothesis. There are a few other studies that do not find evidence
supporting this hypothesis (Nguyen et al., 2013; Bargain and Kwenda, 2014; Staneva and
Arabsheibani, 2014; Tansel et al., 2020).
24. CASE Working Paper | No 1 (2015)
24
The goal of this study was to determine whether individuals working in the informal
sector in Poland incur a wage penalty or rather enjoy a wage premium when compared to
their counterparts in the formal sector. Based on this, I wanted to determine whether it
is the exit, exclusion, or two-tier hypothesis that best explains the determinants of infor-
mal employment in Poland. To answer these questions, I employed the PSM technique and
examined data from the Polish LFS for the period 2009–2017. I used two definitions of
informal employment: employment without a written agreement and employment while
officially registered as unemployed at a labour office.
After controlling for a rich set of individual characteristics, I find that informal workers
earn on average less than formal workers, both in terms of monthly earnings and hourly
wage. When informal workers are defined as employed individuals without a written agree-
ment, the monthly and hourly wage penalties amount to 11.7% and 7.9%, respectively.
When I use the second definition of undeclared employment based on official registration
as unemployed, these wage penalties are even higher (19% and 9.7%, respectively).
Importantly, the results presented above, which are based on a pooled sample (2009–2017),
are also stable over time – that is, I find that informal workers, irrespective of how they
are defined, suffer from monthly and hourly wage penalties in every single year over the
period 2009–2017. Interestingly, this outcome is at odds with the findings of Tyrowicz
and Cichocki (2011), who show that employed individuals who were registered as un-
employed enjoyed a wage premium of 40–60% in the period 1995–2007.
In order to test for the two-tier hypothesis, which is that some individuals work in the
informal sector because they are excluded from formal employment whereas others are
voluntarily informal, I also checked for the heterogeneity of the wage penalty along the
wage distribution. I find that informal workers in the first quartile of the wage distribution
and those above the first quartile are in two partially different segments of the informal
labour market, which supports the two-tier hypothesis. The former suffer from substantially
lower monthly earnings than formal workers, which is a result of both a lower hourly wage
and a shorter working time, while the latter have the same monthly earnings as formal work-
ers because they make up for a slightly lower hourly wage rate with a longer working time.
5. Conclusions
25. CASE Working Papers | No. 14 (138) / 2020
25
Overall, my results are consistent with a few recent studies that find evidence of the two-
tier structure of the informal sector in Brazil (Tannuri-Pianto and Pianto, 2002; Botelho and
Ponczek, 2011) and Russia (Lehmann and Zaiceva, 2013).
One should also keep in mind some limitations of my findings. First, my analysis is based
on data coming from a population survey – that is, on information declared by respondents
– which is obviously subject to a number of measurement problems such as non-reporting
or misreporting. This issue, which is common for all studies using this type of data, may be
even more important in cases of studies on this topic, as some respondents may be unwill-
ing to reveal the informal nature of their employment or the amount of their informal earn-
ings. This is why I used two different methods of measuring informal employment status.
Importantly, the wording of both questions in the LFS questionnaire, on which these two
definitions are based, does not suggest that they are aimed to identify informal employment.
Second, although I used the PSM technique and a rich set of variables to control for observ-
able heterogeneity, the wage gap between informal and formal workers may still be biased
due to unobservable heterogeneity.
26. CASE Working Papers | No. 14 (138) / 2020
26
Notes
[1] For more information on the Polish LFS, see Statistics Poland (2018).
[2] The nominal amounts of monthly earnings and hourly wage were deflated with the CPI
(base year=2009).
[3] The computations were performed in Stata/SE 13.0, using the psmatch2 command,
version 4.0.11 22 oct2014.
[4] The full set of estimates is reported in Table A4 in the Appendix.
[5] Small differences between the PSM and OLS estimates of the raw wage gap result from
the fact that I used weights in the OLS estimation, while the PSM unmatched estimates
are – by definition – not weighted. The weighting in the PSM estimation is applied only
in the matching process when the propensity scores are estimated. Thus, only the ATT
estimates are weighted.
27. CASE Working Paper | No 1 (2015)
27
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Table A1. Variables in the wage equations
Note: asterisks indicate the base category. Source: Author’s own elaboration.
Appendix
VARIABLES DEFINITION / VALUE CLASSES
Dependent variables
Earnings (ln)
The natural logarithm of net amount earned last month
on the main job (in PLN) deflated with CPI (base year=2009)
Working time The number of hours typically worked in a week on the main job
Hourly wage (ln)
The natural logarithm of net amount earned last
month on the main job per one hour of working time
(in PLN) deflated with CPI (base year=2009)
Independent variables
Informal employment
Employment without a written agreement 1 – yes; 0* – no
Employment while registered as unemployed 1 – yes; 0* – no
Controls
Gender 1 – woman; 0* – man
Age, age square continuous variables
Civil status 1 – single; 0* – married
Education level
1 – tertiary; 2 – post-secondary; 3 – secondary vocational;
4 – secondary general; 5 – basic vocational; 6* – primary or less
Firm size
1* – up to 10 employees; 2 – 11–49 employees;
3 – 50–250 employees; 4 – 251 employees or more; 5 – unknown
Firm ownership 1 – private; 0* – public
Firm economic sector
Binary variables for 21 sections (Level 1) of economic
activity according to NACE-08.
Occupation Binary variables for 10 major (one digit) groups
of occupations according to ISCO-08.
Job tenure continuous variable (years)
Internship 1 – employed as an intern; 0* – otherwise
Trial period 1 – employed on a trial period; 0* – otherwise
Place of residence
1* – town >100,000 inhabitants; 2 – town 50,000–100,000
inhabitants; 3 – town 20,000–50,000 inhabitants; 4 – town 10,000–
20,000 inhabitants; 5 – town 5,000–10,000 inhabitants; 6 – town
2,000–5,000 inhabitants; 7 – town < 2,000 inhabitants; 8 – rural
Region (voivodship)
1* – Dolnośląskie; 2 – Kujawsko-pomorskie; 3 – Lubelskie;
4 – Lubuskie; 5 – Łódzkie; 6 – Małopolskie; 7 – Mazowieckie;
8 – Opolskie; 9 – Podkarpackie; 10 – Podlaskie; 11 – Pomorskie;
12 – Śląskie; 13 – Świętokrzyskie; 14 – Warmińsko-mazurskie;
15 – Wielkopolskie; 16 – Zachodniopomorskie
Survey year Binary variables for the years 2009–2017
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Table A2. Descriptive statistics of the sample
Source: Author’s own analyses based on unit data from the Polish LFS, 2009–2017.
VARIABLES
EMPLOYED INDIVIDUALS
WITHOUT A WRITTEN AGREEMENT
EMPLOYED INDIVIDUALS
WITH A WRITTEN AGREEMENT
MEAN
STD.
DEV.
MIN MAX MEAN
STD.
DEV.
MIN MAX
Earnings (PLN) 1428.53 766.51 126.70 7288.89 1784.41 903.34 120.86 10666.67
Working time
(hours per week)
40.39 10.60 0 140 39.94 6.80 0 140
Hourly wage (PLN) 8.44 4.51 0.70 72.59 10.61 5.58 0.51 273.26
Woman 0.319 0.466 0 1 0.489 0.500 0 1
Age 38.9 11.8 18 64 40.9 11.3 18 64
Single 0.444 0.497 0 1 0.305 0.460 0 1
Education level 4.325 1.521 1 6 3.278 1.699 1 6
Firm size 1.925 1.213 1 5 2.661 1.159 1 5
Firm ownership 0.886 0.318 0 1 0.668 0.471 0 1
Occupation 6.610 2.177 0 9 5.158 2.558 0 9
Job tenure 4.654 7.155 0 45.3 9.681 9.735 0 49.8
Internship 0.032 0.176 0 1 0.028 0.166 0 1
Trial period 0.042 0.200 0 1 0.024 0.152 0 1
Place of residence 5.146 3.932 0 9 4.277 3.880 0 9
Number of
observations
10,054 322,129
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Table A2. Descriptive statistics of the sample (cont.)
Source: Author’s own analyses based on unit data from the Polish LFS, 2009–2017.
VARIABLES
EMPLOYED INDIVIDUALS
WHO ARE REGISTERED AS UNEMPLOYED
EMPLOYED INDIVIDUALS
WHO ARE NOT REGISTERED AS UNEMPLOYED
MEAN STD. DEV. MIN MAX MEAN STD. DEV. MIN MAX
Earnings (PLN) 1086.24 614.01 140.19 6250.00 1779.25 901.39 120.86 10666.67
Working time (hours) 37.92 12.44 2 140 39.97 6.88 0 140
Hourly wage (PLN) 6.81 3.29 1.39 37.09 10.57 5.57 0.51 273.26
Woman 0.407 0.491 0 1 0.485 0.500 0 1
Age 36.7 12.4 18 64 40.9 11.3 18 64
Single 0.544 0.498 0 1 0.307 0.461 0 1
Education level 4.310 1.505 1 6 3.301 1.702 1 6
Firm size 1.873 1.231 1 5 2.645 1.165 1 5
Firm
ownership
sector
0.781 0.414 0 1 0.674 0.469 0 1
Occupation 6.770 2.090 0 9 5.189 2.559 0 9
Job tenure 1.839 4.212 0 40.5 9.592 9.713 0.0 49.8
Internship 0.203 0.402 0 1 0.027 0.162 0 1
Trial period 0.044 0.205 0 1 0.024 0.153 0 1
Place of residence 5.320 3.786 0 9 4.295 3.884 0 9
Number
of observations
2,690 329,493
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Table A3. Determinants of employment without a written agreement (probit estimates)
Model specification COEFFICIENT
STANDARD
ERROR
STATISTIC Z PR > |Z|
Woman –0.077 0.015 –5.10 0.000
Age 0.018 0.004 4.53 0.000
Age square 0.000 0.000 –3.83 0.000
Single 0.152 0.013 11.58 0.000
Education level: tertiary –0.449 0.030 –15.03 0.000
Post-secondary –0.455 0.042 –10.87 0.000
Secondary vocational –0.341 0.021 –16.26 0.000
Secondary general –0.286 0.026 –11.00 0.000
Basic vocational –0.212 0.018 –11.98 0.000
Firm size: 11-49 employees 0.467 0.024 19.85 0.000
50-250 employees –0.001 0.024 –0.04 0.971
251 employees or more –0.144 0.026 –5.59 0.000
Firm size: unknown –0.185 0.029 –6.32 0.000
Firm ownership: private 0.127 0.025 5.17 0.000
Firm economic sector: non-individu-
al agriculture, forestry or fishing
–0.608 0.045 –13.61 0.000
Mining and Quarrying –1.212 0.074 –16.31 0.000
Manufacturing –1.000 0.033 –29.92 0.000
Electricity, Gas, Steam and Air Conditioning Supply –0.874 0.083 –10.48 0.000
Water Supply; Sewerage, Waste Man-
agement and Remediation Activities
–1.045 0.058 –18.03 0.000
Construction –0.510 0.033 –15.37 0.000
Wholesale and Retail Trade; Repair of
Motor Vehicles and Motorcycles
–1.106 0.036 –30.37 0.000
Transportation and Storage –1.056 0.041 –25.51 0.000
Accommodation and Food Service Activities –0.961 0.044 –21.62 0.000
Information and Communication –1.165 0.066 –17.61 0.000
Financial and Insurance Activities –1.179 0.066 –17.92 0.000
Real Estate Activities –1.141 0.078 –14.58 0.000
Professional, Scientific and Technical Activities –1.001 0.058 –17.12 0.000
Administrative and Support Service Activities –1.209 0.044 –27.31 0.000
Public Administration and Defence –0.889 0.049 –17.99 0.000
Education –1.022 0.046 –22.22 0.000
Human Health and Social Work Activities –0.930 0.044 –20.94 0.000
Arts, Entertainment and Recreation –1.030 0.072 –14.37 0.000
Other service activities –0.473 0.045 –10.57 0.000
Unknown –0.733 0.190 –3.85 0.000
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Model specification COEFFICIENT
STANDARD
ERROR
STATISTIC Z PR > |Z|
2012 –0.232 0.024 –9.80 0.000
2013 –0.272 0.024 –11.12 0.000
2014 –0.293 0.022 –13.07 0.000
2015 –0.271 0.024 –11.44 0.000
2016 –0.309 0.024 –12.61 0.000
2017 –0.408 0.026 –15.46 0.000
Constant –0.572 0.126 –4.55 0.000
Pseudo R2 0. 1998
No of observations 330,889
Notes: ***/**/* stand for 1%, 5% and 10% significance, respectively; standard errors in brackets.
Source: Author’s own analyses based on unit data from the Polish LFS, 2009–2017.
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Table A4. Effects of employment without a written agreement (full set of OLS estimates)
MODEL SPECIFICATION
EARNINGS HOURLY WAGE WORKING TIME
(1) (2) (3)
Employment without a written contract
–0.091*** –0.054*** –0.628***
(0.006) (0.005) (0.123)
Woman –0.201*** –0.161*** –1.421***
(0.002) (0.001) (0.030)
Age 0.029*** 0.020*** 0.274***
(0.001) (0.001) (0.012)
Age square
–0.000*** –0.000*** –0.004***
(0.000) (0.000) (0.000)
Single
–0.041*** –0.036*** –0.138***
(0.002) (0.001) (0.033)
Education level: tertiary
0.292*** 0.288*** –0.064
(0.004) (0.004) (0.079)
Post-secondary
0.154*** 0.141*** 0.229**
(0.005) (0.004) (0.094)
Secondary vocational
0.147*** 0.129*** 0.402***
(0.004) (0.003) (0.069)
Secondary general
0.145*** 0.137*** 0.158**
(0.004) (0.003) (0.080)
Basic vocational
0.073*** 0.057*** 0.426***
(0.003) (0.003) (0.067)
Firm size: 11–49 employees
0.087*** 0.063*** 0.546***
(0.002) (0.002) (0.047)
50–250 employees
0.140*** 0.098*** 1.028***
(0.002) (0.002) (0.048)
251 employees or more
0.217*** 0.170*** 1.184***
(0.003) (0.002) (0.050)
Firm size: unknown
0.083*** 0.071*** 0.305***
(0.004) (0.003) (0.074)
Firm ownership: private
0.022*** 0.004* 0.846***
(0.003) (0.002) (0.049)
Firm economic sector:
non-individual agriculture, forestry or fishing
0.006 0.033*** –1.057***
(0.010) (0.009) (0.209)
Mining and Quarrying
0.191*** 0.256*** –2.281***
(0.010) (0.010) (0.202)
39. CASE Working Papers | No. 14 (138) / 2020
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MODEL SPECIFICATION
EARNINGS HOURLY WAGE WORKING TIME
(1) (2) (3)
Manufacturing
–0.047*** 0.010 –2.168***
(0.009) (0.008) (0.183)
Electricity, Gas,
Steam and Air Conditioning Supply
0.077*** 0.146*** –2.400***
(0.010) (0.009) (0.199)
Water Supply; Sewerage,
Waste Management and Remediation Activities
–0.031*** 0.018** –1.864***
(0.010) (0.009) (0.202)
Construction
0.101*** 0.089*** 0.577***
(0.009) (0.008) (0.189)
Wholesale and Retail Trade;
Repair of Motor Vehicles and Motorcycles
–0.052*** 0.001 –1.984***
(0.009) (0.008) (0.187)
Transportation and Storage
0.044*** 0.070*** –0.569***
(0.009) (0.008) (0.191)
Accommodation and Food Service Activities
–0.054*** 0.013 –2.146***
(0.010) (0.008) (0.210)
Information and Communication
–0.020* 0.060*** –2.824***
(0.011) (0.010) (0.219)
Financial and Insurance Activities
0.037*** 0.083*** –1.677***
(0.010) (0.009) (0.204)
Real Estate Activities
–0.055*** 0.033*** –3.031***
(0.011) (0.010) (0.221)
Professional, Scientific and Technical Activities
–0.082*** –0.020** –2.190***
(0.011) (0.009) (0.211)
Administrative and Support Service Activities
–0.182*** –0.109*** –2.432***
(0.009) (0.008) (0.202)
Public Administration and Defence;
Compulsory Social Security
–0.030*** 0.027*** –1.808***
(0.009) (0.008) (0.193)
Education
–0.115*** 0.048*** –4.962***
(0.009) (0.008) (0.194)
Human Health and Social Work Activities
–0.150*** –0.097*** –1.614***
(0.009) (0.008) (0.194)
Arts, Entertainment and Recreation
–0.151*** –0.019* –3.818***
(0.011) (0.010) (0.239)
Other service activities
–0.130*** –0.017* –3.318***
(0.013) (0.010) (0.263)
Unknown
–0.057* 0.023 –2.768***
(0.031) (0.027) (0.513)
Occupation: managers
0.077*** 0.037*** 1.556***
(0.007) (0.007) (0.085)
40. CASE Working Papers | No. 14 (138) / 2020
40
MODEL SPECIFICATION
EARNINGS HOURLY WAGE WORKING TIME
(1) (2) (3)
Professionals
–0.085*** –0.059*** –0.413***
(0.006) (0.006) (0.077)
Technicians and associate professionals
–0.202*** –0.208*** 0.399***
(0.006) (0.006) (0.070)
Clerical support workers
–0.358*** –0.364*** 0.228***
(0.006) (0.006) (0.076)
Service and sales workers
–0.376*** –0.402*** 1.076***
(0.006) (0.006) (0.083)
Skilled agricultural, forestry and fishery workers
–0.383*** –0.400*** 0.774***
(0.013) (0.011) (0.224)
Craft and related trades workers
–0.335*** –0.355*** 0.913***
(0.006) (0.006) (0.077)
Plant and machine operators and assemblers
–0.314*** –0.344*** 1.384***
(0.006) (0.006) (0.078)
Elementary occupations
–0.463*** –0.447*** –0.155*
(0.007) (0.006) (0.089)
Job tenure
0.013*** 0.009*** 0.086***
(0.000) (0.000) (0.005)
Job tenure square
–0.000*** –0.000*** –0.002***
(0.000) (0.000) (0.000)
Internship
–0.212*** –0.203*** –0.495***
(0.006) (0.005) (0.095)
Trial period
–0.037*** –0.045*** 0.145
(0.005) (0.004) (0.095)
Place of residence: town 50,000–100,000 inhabitants
–0.034*** –0.035*** –0.007
(0.003) (0.002) (0.050)
Town 20,000–50,000 inhabitants
–0.041*** –0.046*** 0.130***
(0.002) (0.002) (0.046)
Town 10,000–20,000 inhabitants
–0.042*** –0.048*** 0.170***
(0.003) (0.002) (0.050)
Town 5,000–10,000 inhabitants
–0.049*** –0.054*** 0.137**
(0.004) (0.004) (0.070)
Town 2,000–5,000 inhabitants
–0.039*** –0.045*** 0.229***
(0.004) (0.004) (0.083)
Town < 2,000 inhabitants
–0.039*** –0.043*** 0.244
(0.011) (0.011) (0.266)