# **Table 4 Macro determinants of the shares of informal employees in the extended labor force. Eastern and Southern Europe, 2004-2009**

||(|_alternativep _|_anel data esti_|_mates_)|||
|---|---|---|---|---|---|---|
||[1]|[2]|[3]|[4]|[5]|[6]|
||Prais-Wins<br>heterosceda<br>AR1 within|ten regression<br>stic, with cou<br>panels<sup>a</sup>|s, errors<br>ntry-specific|Multi-level<br>mixed-effects<br>linear model<br>b|Population-<br>panel-data<br>semi-robust<br>clustered on|averaged<br>models with<br>SE‘s<br>countries<sup>c</sup>|
|Employment Protection<br>|1.287*|2.123***|2.075**|2.227*|2.581***|3.645***|
|Legislation strictness|(0.674)|(0.775)|(0.900)|(1.198)|(0.928)|(1.123)|
|Rule of Law (lagged 1 yr<br>if fild k d|||||-10.513***|-9.761***|
|e wor starte<br>earlier than September)|||||(2.346)|(2.140)|
|Govt. Effectiveness|-6.571***|-5.357***|-5.419***|-1.949*|||
|(lagged 1 year)|(2.193)|(1.845)|(1.828)|(1.061)|||
|Investment Freedom|-0.222***|-0.215***|-0.213***|-0.135***|||
||(0.052)|(0.044)|(0.043)|(0.044)|||
|Trade Freedom|-0.058*|-0.066**|-0.061**||||
||(0.032)|(0.027)|(0.025)||||
|Tax Wedge for low wage|||-0.025||0.088||
|earners,%(lagged 1yr)|||(0.120)||(0.113)||
|Implicit tax rate on labor||||||0.189**|
|<br>income,%||||||(0.088)|
|Minimum Wage (% of<br>average wage in industry|0.383***|0.359***|0.359***|0.203***|0.377***|0.488***|
|<br>& services)|(0.048)|(0.051)|(0.050)|(0.071)|(0.111)|(0.165)|
|<br>log GDP per capita, PPP<br>|4.571***|3.441***|3.475***|0.465|5.594***|4.605***|
|USD (annual average,<br>lagged 1 year)|(1.046)|(0.995)|(1.000)|(0.469)|(1.905)|(1.551)|
|Real GDP Growth y-o-y|0.214***|0.136**|0.132**|0.078*|0.047|0.035|
|<br>(previousquarter)|(0.039)|(0.057)|(0.064)|(0.042)|(0.058)|(0.066)|
|Union Density,|-0.303***|-0.297***|-0.295***|-0.190***|-0.117**|-0.177**|
|% of employees|(0.049)|(0.044)|(0.048)|(0.061)|(0.051)|(0.072)|
|_IMMIGR:_% pop. with|0.310***|0.194***|0.194***|0.193|0.166**|0.139***|
|<br>immigrant background|(0.031)|(0.054)|(0.057)|(0.128)|(0.065)|(0.052)|
|Country random-effects|||||||
|sd(beta[_IMMIGR_] )||||0.201|||
|sd(_ui_)||||1.345|||
|Residuals: sd(_eit_), East||||1.086|||
|Residuals: sd(_eit_), South||||1.786|||
|LR test vs. a model<br>without random effects||||Prob > chi2<br>= 0.0035|||
|Root MSE|1.8553|1.6659|1.6744|0.9660|1.9891|1.9296|
|R-squared|0.9275|0.9140|0.9154||||
|# obs. [# countries]|37 [16]|35 [14]|35[14]|35[14]|35[14]|30 [12]|

_Notes:_ Countries covered: For models [2] – [5], see Notes to Table 3A. Model [1] covers also Israel (2008) and Lithuania (2009). Model [6] excludes Russia and Ukraine. Models [2] – [6] include at least 2 observations for each country but Romania. See Annex 1 for details on the explanatory variables. Constant terms are not reported. a See Davison and MacKinnon (1993): 343-351; Beck and Katz (1995). b See Greene (2008): 233-238. c See Liang and Zeger (1986); Zeger et al. (1988). Results are obtained by averaging random effects across population. Models [5] and [6] assume all off-diagonal error correlations within panels to be equal (estimated rho: 0.429 in [5] and 0.153 in [6]). Random effects in [4]-[6] may correlate with explanatory variables. *, **, *** - coefficient is significantly different from zero at 10%, 5%, 1% level.

_Sources_ : Model estimates - own calculations. Dependent and explanatory variables: See Table 1 and Table A1.

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