Skip to main content
Article thumbnail
Location of Repository

Minimum wage and tax evasion: theory and evidence

By Mirco Tonin

Abstract

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

Topics: HD, HJ
Year: 2011
OAI identifier: oai:eprints.soton.ac.uk:186031
Provided by: e-Prints Soton
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://dx.doi.org/10.1016/j.jp... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.