In a study of employees in Russia, researchers compared people whose car-ownership data implied that their earnings were the same and found that those working for foreign-owned firms earned, on the books, four times more than those working for domestic private firms. The data, from 1999 to 2003, suggests that the Russian firms hid large portions of employees’ compensation, say Serguey Braguinsky of Carnegie Mellon University and Sergey Mityakov of Clemson University. Workers often receive unreported income in the form of cash so that both the firm and its employees can avoid taxes and circumvent regulations.

(Source: Journal of Financial Economics)

Published in Dawn, Economic & Business, August 3rd, 2015

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