To read the full version of this content please select one of the options below:

Chapter 1 Tax Evasion, Minimum Wage Noncompliance, and Informality

Informal Employment in Emerging and Transition Economies

ISBN: 978-1-78052-786-4, eISBN: 978-1-78052-787-1

ISSN: 0147-9121

Publication date: 12 April 2012

Abstract

We study the impact of tax and minimum wage reforms on the incidence of informality. To gauge the incidence of informality, we use measures of the extent of tax evasion, the extent of minimum wage noncompliance, and the size of the informal workforce. Our approach allows us to examine (i) the distinction between determinants of firm-level reported wage distribution and actual wage distribution, (ii) the complementarity of tax and minimum wage enforcement, (iii) the impact that a minimum wage reform has on tax and minimum wage compliance, and (iv) the impact that a tax policy reform has on tax and minimum wage compliance. We conclude with the design of optimal minimum wage and tax policies (even in the complete absence of minimum wage enforcement). We do so based on two objectives derived from popular concerns associated with an unchecked expansion of informality: tax revenue maximization, and poverty alleviation among workers.

Keywords

Citation

Basu, A.K., Chau, N.H. and Siddique, Z. (2012), "Chapter 1 Tax Evasion, Minimum Wage Noncompliance, and Informality", Lehmann, H. and Tatsiramos, K. (Ed.) Informal Employment in Emerging and Transition Economies (Research in Labor Economics, Vol. 34), Emerald Group Publishing Limited, Bingley, pp. 1-53. https://doi.org/10.1108/S0147-9121(2012)0000034004

Publisher

:

Emerald Group Publishing Limited

Copyright © 2012, Emerald Group Publishing Limited