Exploiting a change in reporting defaults and the implied audit threat in Hungary, we demonstrate that a substantial portion of employees and the self-employed reporting to earn the minimum wage have much higher earnings in reality. This can be seen from their sharp but temporary jump to the new...

We study the taxation of the minimum wage in an environment with imperfect enforcement and informality. We leverage an increase in the audit threat for earnings below a reporting threshold at twice the minimum wage in Hungary and estimate reporting and employment responses with administrative...