Employed Unemployed? On Shadow Employment in Transition

Unregistered employment poses two types of challenges to the researchers: 1. reliably evaluating the wage differential between formally and informally employed, and 2. accounting for the push and pull factors in general and the effects of business cycle in particular. We address the former with the use of propensity score matching and analyse the evolution of the estimated average compensations and the differentials with reference to GDP and unemployment fluctuations. Using 13 years of quarterly labour force survey data from Poland of de iure unemployed but de facto employed individuals we find, that in-the-shadow compensations tend to be higher and procyclical. We also find considerable distributional heterogeneity.