Minimum wage and tax evasion: theory and evidence
Tonin, Mirco (2011) Minimum wage and tax evasion: theory and evidence. [in special issue: Special Issue: International Seminar for Public Economics on Normative Tax Theory] Journal of Public Economics, 95, (11-12), 1635-1651. (doi:10.1016/j.jpubeco.2011.04.005).
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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.
|Keywords:||minimum wage, tax evasion; spike|
|Subjects:||H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HJ Public Finance
|Divisions:||University Structure - Pre August 2011 > School of Social Sciences
|Date Deposited:||11 May 2011 17:19|
|Last Modified:||27 Mar 2014 19:40|
|RDF:||RDF+N-Triples, RDF+N3, RDF+XML, Browse.|
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Minimum wage and tax evasion: theory and evidence. (deposited 07 Aug 2007)
- Minimum wage and tax evasion: theory and evidence. (deposited 11 May 2011 17:19) [Currently Displayed]
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