Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108110
Authors: 
Tonin, Mirco
Year of Publication: 
2007
Series/Report no.: 
IEHAS Discussion Papers MT-DP - 2007/1
Abstract: 
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.
Subjects: 
Minimum Wage
Tax Evasion
Wage Distribution
Hungary
JEL: 
J38
H26
H32
P2
ISBN: 
978-963-9588-93-6
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.