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Minimum wage and tax evasion: theory

Minimum wage and tax evasion: theory
Minimum wage and tax evasion: theory
The paper builds a theoretical model to analyse the interaction between minimum wage legislation and tax evasion by employed labour. The firm and the worker agree on the amount of earnings to report to the fiscal authorities, which possess an imperfect detection technology. The introduction of the minimum wage poses a constraint on the reporting decision and induces an increase in compliance by some agents. As a consequence, a spike at the minimum wage appears in the distribution of declared earnings. Moreover, a nominally neutral fiscal regime becomes regressive, while fiscal revenues may increase.
minimum wage, tax evasion
0966-4246
711
University of Southampton
Tonin, Mirco
2929ca00-ca4e-4eb3-bf2b-a5d233b80253
Tonin, Mirco
2929ca00-ca4e-4eb3-bf2b-a5d233b80253

Tonin, Mirco (2007) Minimum wage and tax evasion: theory (Discussion Papers in Economics and Econometrics, 711) Southampton, UK. University of Southampton 53pp.

Record type: Monograph (Discussion Paper)

Abstract

The paper builds a theoretical model to analyse the interaction between minimum wage legislation and tax evasion by employed labour. The firm and the worker agree on the amount of earnings to report to the fiscal authorities, which possess an imperfect detection technology. The introduction of the minimum wage poses a constraint on the reporting decision and induces an increase in compliance by some agents. As a consequence, a spike at the minimum wage appears in the distribution of declared earnings. Moreover, a nominally neutral fiscal regime becomes regressive, while fiscal revenues may increase.

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More information

Published date: 2007
Related URLs:
Keywords: minimum wage, tax evasion

Identifiers

Local EPrints ID: 51851
URI: http://eprints.soton.ac.uk/id/eprint/51851
ISSN: 0966-4246
PURE UUID: 297d9e6d-156d-48b0-8f0c-47f812c80d04

Catalogue record

Date deposited: 06 Aug 2008
Last modified: 22 Jul 2022 20:59

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Contributors

Author: Mirco Tonin

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