Evaluating Cross-National Variations in Envelope Wage Payments in EastCentral Europe
Economic and Industrial Democracy: an International Journal, Vol. 36, No. 2, pp. 283-303, 2015
33 Pages Posted: 10 Jan 2017
Date Written: January 10, 2015
This article seeks to explain the cross-national variations in the tendency of employers to underdeclared salaries by paying formal employees an undeclared (‘envelope’) wage in addition to their official declared salary. Analysing the prevalence, size and nature of envelope wage payments across 10 East-Central European countries using data from a 2007 Eurobarometer survey, envelope wage payments are found to be less common, smaller and more likely to be for extra work in wealthier, less corrupt and more equal nations with higher levels of taxation, social protection and effective redistribution via social transfers. The theoretical and policy implications are then discussed.
Keywords: Central and Eastern Europe, Envelope Wages, Informal Economy, Informal Employment, Tax Compliance, Tax Evasion
JEL Classification: H26, J46, J48, K34, K42, O17, P37
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