Foreign ownership and labor tax evasion: Evidence from Latvia
2021
Gavoille, Nicolas | Zasova, Anna
This paper shows that in a context of widespread labor tax evasion, employees of foreign-owned firms receive less undeclared cash payments than employees of domestic firms. The empirical analysis relies on a combination of administrative and survey data and implements an expenditure-based underreporting analysis à la Pissarides and Weber (1989). This provides an alternative explanation for the wage premium for employees of foreign-owned firms observed in similar environments.
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