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Cash wage payments in transition economies: Consequences of envelope wages

Author

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  • Ioana Alexandra Horodnic

    (Alexandru Ioan Cuza University of Iaşi, Romania)

Abstract

In transition economies, a significant number of companies reduce their tax and social contributions by paying their staff an official salary, described in a registered formal employment agreement, and an extra, undeclared “envelope wage,” via a verbal unwritten agreement. The consequences include a loss of government income and a lack of fair play for lawful companies. For employees, accepting under-reported wages reduces their access to credit and their social protections. Addressing this issue will help increase the quality of working conditions, strengthen trade unions, and reduce unfair competition.

Suggested Citation

  • Ioana Alexandra Horodnic, 2016. "Cash wage payments in transition economies: Consequences of envelope wages," IZA World of Labor, Institute for the Study of Labor (IZA), pages 280-280, July.
  • Handle: RePEc:iza:izawol:journl:y:2016:n:280
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    References listed on IDEAS

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    5. Christopher Trenholm & Barbara Devaney & Kenneth Fortson & Melissa Clark & Lisa Quay & Justin Wheeler, 2008. "Impacts of abstinence education on teen sexual activity, risk of pregnancy, and risk of sexually transmitted diseases," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(2), pages 255-276.
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    Cited by:

    1. repec:jes:journl:y:2017:v:8:p:5-28 is not listed on IDEAS
    2. repec:nwe:eajour:y:2017:i:4:p:515-531 is not listed on IDEAS
    3. Mirela STOICAN & Adina Liana CAMARDA & Corina Carmen VI?AN & Nelly FILIP & Culai DASCÃLU & Alina M. IONA?CU & Cristinel ?ONEA & Leonard STOICAN, 2016. "Implications Of Improving The Quality Of Training Human Services Agritourists In South Eastern Romania," THE YEARBOOK OF THE “GH. ZANE” INSTITUTE OF ECONOMIC RESEARCHES, Gheorghe Zane Institute for Economic and Social Research ( from THE ROMANIAN ACADEMY, JASSY BRANCH), vol. 25(1), pages 61-72.
    4. repec:ris:utmsje:0218 is not listed on IDEAS
    5. Ioana A. HORODNI & Colin C. WILLIAMS & Adrian V. HORODNIC, 2016. "Are Practices Of Competitors In The Informal Sector A Major Threat For Hotels And Restaurants?," THE YEARBOOK OF THE “GH. ZANE” INSTITUTE OF ECONOMIC RESEARCHES, Gheorghe Zane Institute for Economic and Social Research ( from THE ROMANIAN ACADEMY, JASSY BRANCH), vol. 25(1), pages 49-60.

    More about this item

    Keywords

    envelope wages; informal employment; undeclared economy; tax evasion;

    JEL classification:

    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy

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