The effects of the minimum wage in an economy with tax evasion
2006 (English)Report (Other academic)
A model of the labor market is built where imperfect detection in case of auditing induces underreporting of earnings. The introduction of the minimum wage makes some workers increase compliance, boosting fiscal revenues. A spike at the minimum wage level appears in the distribution of earnings. The model predicts a positive correlation between the size of the spike at the minimum wage level and the size of the informal economy. Empirical evidence supporting this prediction is presented.
Place, publisher, year, edition, pages
Stockholm: Institutet för internationell ekonomi , 2006.
Seminar Paper / Institute for International Economic Studies, Stockholm University. (Online), ISSN 1653-610X ; 747
minimum wage, tax evasion
IdentifiersURN: urn:nbn:se:su:diva-1301OAI: oai:DiVA.org:su-1301DiVA: diva2:189820