Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249696 
Year of Publication: 
2021
Series/Report no.: 
IFS Working Paper No. W21/41
Publisher: 
Institute for Fiscal Studies (IFS), London
Abstract: 
We study the taxation of the minimum wage in an environment with imperfect enforcement and informality. We leverage an increase in the audit threat for earnings below a reporting threshold at twice the minimum wage in Hungary and estimate reporting and employment responses with administrative panel data. Using bunching estimators and difference-in-differences methods, we show that a substantial share of those who report earning the minimum wage earn at least the same amount off the books. When enforcement is imperfect, a taxed minimum wage serves as a backstop on underreporting and recovers some revenue but also increases informality.
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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