Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83565
Authors: 
Tonin, Mirco
Year of Publication: 
2009
Series/Report no.: 
MNB Working Papers 2009/2
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 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.
Subjects: 
MinimumWage
Tax Evasion
Hungary
JEL: 
J38
H24
H26
H32
Document Type: 
Working Paper

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