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This paper analyzes a large and biting minimum wage hike in a context of prevalent labor tax evasion. We examine a di\ufb00use type of labor tax evasion: envelope wage, i.e., an unreported cash-in-hand complement to the of\ufb01cial wage. Exploiting a combination of administrative and survey data, we propose a methodology to disentangle compliant \ufb01rms from tax evading ones and assess the validity of the approach with several checks.<\/p>\n

We then study \ufb01rm-level employment response to the minimum wage hike conditional on tax compliance. Contrary to compliant \ufb01rms, \ufb01rms engaged in labor tax evasion are insensitive to the minimum wage shock. Our results suggest that \ufb01rms use wage underreporting as a margin to absorb the minimum wage shock. Increasing minimum wage contributes to tax rules enforcement by pushing tax-evading \ufb01rms to convert part of the envelope into legal wage. This however comes at the cost of negative employment consequences for compliant \ufb01rms.<\/p>\n

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Speakers: Nicolas GAVOILLE SSE Riga Date and Location – Thursday November 25th 2021 from 14:00 to 15:30 on Zoom —————————————– ABSTRACT This paper analyzes a large and biting minimum wage […]<\/p>\n","protected":false},"featured_media":0,"template":"","events-category":[66,166],"acf":[],"yoast_head":"\n[Research Seminar] Finance: "What we pay in the shadow: Labor tax evasion, minimum wage hike and employment" N. 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