A book chapter titled Envelope Wages in Bosnia and Herzegovina: Incidence and Distributional Implications co-authored by CREDI researchers Amela Kurta, Nermin Oruč and Dželila Kramer was published in the book Towards Economic Inclusion in the Western Balkans: New Perspectives on South-East Europe. The book was edited by William Bartlett and Milica Uvalić and published by Palgrave Macmillan.
The book chapter explores envelope wages as a widespread phenomenon in Bosnia and Herzegovina (BiH). It compares data from the Household Budget Survey and administrative tax records to produce estimates of the extent and distributional implications of envelope wages in BiH. We first estimate the extent of underreporting of income by re-creating the joint distribution of the actual and reported taxable income. Then, these estimates are used in a microsimulation model to calculate the fiscal and distributional implications of such underreporting, controlling for other direct taxes, benefits and their interactions. The evidence produced suggests that the average rate of underreporting in BiH is 6.7% overall, with a larger presence among the male and younger population. Moreover, the findings suggest that envelope wages reduce poverty and inequality levels, as well as government revenues. The evidence is policy relevant as it provides important insights for the design of policies tackling tax evasion and improving social protection in BiH. The paper is unique, since it offers evidence about envelope wages for the first time in BiH, as well as being the first example of research based on a combination of administrative and survey data in BiH.
You can find the book chapter here.