Minimum wage and tax evasion: theory and evidence
This paper examines the interaction between minimum wage legislation and tax evasion by employed labor. I develop a model in which firms and workers may agree to report less than the true amount of earnings to the fiscal authorities. I show that introducing a minimum wage creates a spike in the dist...
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| Format: | Article |
| Language: | English |
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2011-12.
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| Online Access: | Get fulltext |
| LEADER | 01086 am a22001213u 4500 | ||
|---|---|---|---|
| 001 | 186031 | ||
| 042 | |a dc | ||
| 100 | 1 | 0 | |a Tonin, Mirco |e author |
| 245 | 0 | 0 | |a Minimum wage and tax evasion: theory and evidence |
| 260 | |c 2011-12. | ||
| 856 | |z Get fulltext |u https://eprints.soton.ac.uk/186031/1/MWTaxEvasionJPubE_2ndRR_Final_All.pdf | ||
| 520 | |a This paper examines the interaction between minimum wage legislation and tax evasion by employed labor. I develop a model in which firms and workers may agree to report less than the true amount of earnings to the fiscal authorities. I show that introducing a minimum wage creates a spike in the distribution of declared earnings and induces higher compliance by some agents, thus reducing their disposable income. The comparison of food consumption and of the consumption-income gap before and after the massive minimum wage hike that took place in Hungary in 2001 reveals that households who appeared to benefit from the hike actually experienced a drop compared to similar but unaffected households, thus supporting the prediction of the theory. | ||
| 655 | 7 | |a Article | |