The minimum wage, informal pay, and tax enforcement

We study the implications of minimum wage for taxation in an environment with imperfect enforcement and informality. Leveraging increase audit threat declared earnings below a threshold at twice Hungary, we estimate reporting employment responses administrative panel data. Our bunching difference-in-differences results show that substantial share those who report earning earn least same amount off books. key insight is taxed serves as backstop on underreporting recovers some revenue —even though it also increases