We propose a theory of firm that is consistent with empirically observed phenomenon of firms simultaneously engaging in both formal and informal activities. Firms face endogenous probability of auditing that depends on the scale of underreporting of both sales and wages. We characterize the conditions for a firm facing corporate, value added and payroll taxes to hide a part of its activities. U...

Using a unique data set and novel identification strategy we explore the effect of state-level minimum wage increases on firms' existing new vacancy postings. Utilizing occupation-specific county-level from Conference Board's Help Wanted Online for 2005-2018, show that lead to substantial declines in postings occupations with larger share workers earning around prevailing wage. Our estimate imp...

Multiple Equilibria and Minimum Wages in Labor Markets with Informational Frictions and Heterogeneous Production Technologies It is often argued that a mandatory minimum wage is binding only if the wage density displays a spike at it. In this paper we analyze a model with search frictions and heterogeneous production technologies, in which imposition of a minimum wage affects wages even though,...

Endogenous Monopsony and the Perverse Effect of the Minimum Wage in Small Firms The minimum wage rate has been introduced in many countries as a means of alleviating the poverty of the working poor. This paper shows, however, that an imperfectly enforced minimum wage rate causes small firms to face an upward-sloping labor supply schedule. Since this turns these firms into endogenous monopsonist...