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), pp. 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.
|Digital Object Identifier (DOI):||doi:10.1016/j.jpubeco.2011.04.005|
|Keywords:||minimum wage, tax evasion, spike|
|Date Deposited:||11 May 2011 17:19|
|Last Modified:||18 Apr 2017 02:14|
|Further Information:||Google Scholar|
|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)
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