Minimum Wage Spike and Income Underreporting

Abstract

The labor markets of many transition countries are characterized by two features: a spike at the minimum wage level in the wage distribution and widespread use of so-called envelope wages, i.e. non-declared cash payments in addition to the official wage. In this brief, we present a body of suggestive evidence showing that tax evaders are overrepresented among minimum wage earners in Latvia. 

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