Some deadweight losses from the minimum wage: the cases of full and partial compliance
AbstractThis paper highlights the social costs from non-price rationing of the labour force due to the minimum wage. By short-circuiting the ability of low reservation-wage workers to underbid high-reservation wage workers, the minimum wage interferes with the market's basic function of grouping the lowest cost workers with the highest productivity firms. The present paper models the deadweight loss that society bears when high reservation-cost workers displace low reservation-cost workers. When firms can evade part or all of the minimum wage, an extra deadweight loss arises. Firms with high evasive ability but low productivity may displace firms with low evasive ability but high productivity.
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Bibliographic InfoArticle provided by Elsevier in its journal Labour Economics.
Volume (Year): 7 (2000)
Issue (Month): 6 (November)
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Web page: http://www.elsevier.com/locate/labeco
Other versions of this item:
- Filip Palda, 2001. "Some Deadweight Losses from the Minimum Wage: The Cases of Full and Partial Compliance," Labor and Demography 0112001, EconWPA.
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
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