Minimumwage 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 fiscalauthorities. 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 before and after the massive minimum wage hike that took place in Hungary in 2001 reveals that households who appear to benefit from it actually experienced a drop compared to similar but unaffected household, thus supporting the prediction of the theory.minimum wage, tax evasion, Hungary.

Minimum Wage and Tax Evasion: Theory and Evidence

The paper investigates the role of the minimum wage in a competi- tive economy in which there is underreporting of earnings by employed labour. The minimum wage induces higher compliance by some low- productivity workers and transforms a nominally neutral .scal system into a regressive one. A spike in the wage distribution at the mini- mum wage level appears and a positive correlation between the size of the spike and the size of the informal economy is predicted and documented using cross-country data for Europe. A further result is that employees whose officially declared earnings appear to be boosted by a minimum wage hike actually experience a decline in their true income. This prediction finds support in an empirical test using the massive increase in the minimum wage that took place in Hungary in 2001 as a quasi-natural experiment.Minimum Wage, Tax Evasion, Wage Distribution, Hungary

Import Tariffs Enforcement with Low Administrative Capacity

Import tariff receipts represent an important share of government revenues in many developing countries and there has recently been a surge in empirical studies showing how evasion in this field is a pervasive phenomenon. In the case of import tariffs, the tax base is the product of quantity and unit value, both of which have to be reported and need to be assessed by the custom authority during an audit. I show that when the fiscal authority has an imperfect detection technology, there is an additional incentive for the taxpayer to underdeclare, as a greater declaration in one dimension actually increases the fine when evasion in the other dimension is detected, and a tax base presenting this feature is subject to more evasion compared to a tax base that can be assessed directly. Also, when enforcement capacity is low, voluntary compliance is higher when the importer is required to declare only the total value of imports.tariff, tax evasion, multiplicative tax base, imperfect detection, low administrative capacity

An experimental investigation of intrinsic motivations for giving

This paper presents results from a modified dictator experiment aimed at distinguishing and quantifying the two intrinsic motivations for giving: warm glow and pure altruism. In particular, we implemented a within-subject experimental design with three treatments: (i) one, where the recipient is the experimenters, which measures altruistic feelings towards the experimenters (T1), (ii) the Crumpler and Grossman (2008) design in which the recipient is a charity, and the dictator's donation crowds out one-for-one a donation by the experimenters, which aims at measuring warm glow giving (T2), (iii) a third one, with a charity recipient and no crowding out, which elicits both types of altruism (T3). We use T1 to assess to what extent altruistic feelings towards the experimenters are a potential confound for measuring warm glow in T2. We find giving in T1 not to be significantly different from T2, suggesting that the Crumpler and Grossman test is an upper bound estimate of warm glow giving. We provide a lower bound estimate based on the behavior of subjects whose estimate of warm glow giving in T2 is not confounded, that is, those who do not display altruistic feelings towards the experimenters in T1. We use these two estimates to decompose giving in T3 into warm glow and pure altruism and find them to be almost equally important. We also propose a new method of detecting warm glow motivation based on the idea that in a random-lottery incentive (RLI) scheme, such as the one employed here, warm glow benefits accumulate and may lead to satiation, whereas purely altruistic motivation does not

Employment protection legislation and job stability: an European cross country analysis

This paper tries to shed some light on the actual changes that occurred in the labour markets dynamics of the European Union 253 (EU-25) over the last decade using job tenure4 data. It then investigates the potential role of employment protection legislation (EPL)5 changes in explaining differences in the dynamics of job stability across countries but also across age groups in light of the dual-track reform strategy introduced in Europe during the same period: in most European countries, reforms were made typically at the margin (for new hires), while EPL for the incumbent workers remained unchanged. Thus, if the legislation does not apply uniformly to all workers, the effects of EPL reforms are expected to be disproportionately felt by new entrants, such as the young, women, and possibly immigrants.The paper opens with a descriptive analysis of job stability measured through job tenure in the EU-25, and its evolution over the last years. The level and structure by age of this indicator is our main empirical material. Data used comes from Labour Force Surveys (EUROSTAT) up to 2006. The analysis shows no generalized decrease in job tenure but a trend towards shorter tenure of young workers (15-24) in most European countries. In a second step, the paper examines the possible explanations behind this trend, focusing on employment protection legislation. An econometric analysis is conducted to test the existence of a link between employment protection and job stability. In particular, we look at the impact of employment protection on average tenure and on the incidence of temporary employment. Finally, some policy recommendations are provided

Employment protection legislation and job stability: an European cross country analysis

This paper tries to shed some light on the actual changes that occurred in the labour markets dynamics of the European Union 253 (EU-25) over the last decade using job tenure4 data. It then investigates the potential role of employment protection legislation (EPL)5 changes in explaining differences in the dynamics of job stability across countries but also across age groups in light of the dual-track reform strategy introduced in Europe during the same period: in most European countries, reforms were made typically at the margin (for new hires), while EPL for the incumbent workers remained unchanged. Thus, if the legislation does not apply uniformly to all workers, the effects of EPL reforms are expected to be disproportionately felt by new entrants, such as the young, women, and possibly immigrants. The paper opens with a descriptive analysis of job stability measured through job tenure in the EU-25, and its evolution over the last years. The level and structure by age of this indicator is our main empirical material. Data used comes from Labour Force Surveys (EUROSTAT) up to 2006. The analysis shows no generalized decrease in job tenure but a trend towards shorter tenure of young workers (15-24) in most European countries. In a second step, the paper examines the possible explanations behind this trend, focusing on employment protection legislation. An econometric analysis is conducted to test the existence of a link between employment protection and job stability. In particular, we look at the impact of employment protection on average tenure and on the incidence of temporary employment. Finally, some policy recommendations are provided.

Disentangling the Sources of Pro-social Behavior in the Workplace: A Field Experiment

This paper presents evidence from a field experiment, which aims to identify the two sources of workers’ pro-social motivation that have been considered in the literature: action-oriented altruism and output-oriented altruism. To this end we employ an experimental design that first measures the level of effort exerted by student workers on a data entry task in an environment that elicits purely selfish behavior and we compare it to effort exerted in an environment that also induces action-oriented altruism. We then compare the latter to effort exerted in an environment where both types of altruistic preferences are elicited. We find that action-oriented altruism accounts for a significant increase in effort, while there is no additional impact due to output-oriented altruism. We also find significant gender-related differences in the treatment effect: women are very responsive to the treatment condition eliciting action-oriented altruism, while men’s behavior is not affected by any of the treatments.pro-social behavior, field experiment, effort, charitable donations

An Experimental Investigation of Intrinsic Motivations for Giving

This paper presents results from a modified dictator experiment aimed at distinguishing and quantifying the two intrinsic motivations for giving: warm glow and pure altruism. In particular, we implemented a within-subject experimental design with three treatments: (i) one, T1, where the recipient is the experimenters, which measures altruistic feelings towards the experimenters, (ii) the Crumpler and Grossman (2008) design, T2, in which the recipient is a charity, and the dictator’s donation crowds out one-for-one a donation by the experimenters, which aims at measuring warm glow giving, (iii) a third one, T3, with a charity recipient and no crowding out, which elicits both types of altruism. We use T1 to assess to what extent altruistic feelings towards the experimenters are a potential confound for measuring warm glow in T2. We find giving in T1 not to be significantly different from T2, suggesting that the Crumpler and Grossman design provides an upper bound estimate of warm glow giving. We provide a lower bound estimate based on the behavior of subjects whose warm glow giving in T2 is not confounded, that is, those who do not display altruistic feelings towards the experimenters in T1. We use these two estimates to quantify the portion of giving in T3 due to pure altruism and find it to be between 20% and 26% of endowment. We also propose a new method of detecting warm glow motivation based on the idea that in a random-lottery incentive (RLI) scheme, such as the one we employ, warm glow accumulates and this may lead to satiation, whereas purely altruistic motivation does not.dictator game, warm glow, pure altruism, charitable giving, random lottery, incentive scheme

Minimum Wage and Tax Evasion: Theory and Evidence

The paper investigates the role of the minimum wage in a competitive economy in which there is underreporting of earnings by employed labour. The minimum wage induces higher compliance by some low- productivity workers and transforms a nominally neutral fiscal system into a regressive one. A spike in the wage distribution at the mini- mum wage level appears and a positive correlation between the size of the spike and the size of the informal economy is predicted and documented using cross-country data for Europe. A further result is that employees whose officially declared earnings appear to be boosted by a minimum wage hike actually experience a decline in their true income. This prediction finds support in an empirical test using the massive increase in the minimum wage that took place in Hungary in 2001 as a quasi-natural experiment.http://deepblue.lib.umich.edu/bitstream/2027.42/57245/1/wp865 .pd