It is well-known that, in static models, minimum wages generate positive worker rents and, consequently, ine?ciently low effort. We show that this result does not necessarily extend to a dynamic context. The reason is that, in repeated employment relationships, ?rms may exploit workers’ future rents to induce excessively high effort.
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Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number
bgse8_2009.
Length: 11 Date of creation: Jun 2009 Date of revision: Handle: RePEc:bon:bonedp:bgse8_2009
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Matthias Kräkel & Anja Schöttner, .
"Minimum Wages and Excessive Effort Supply,"
Discussion Papers
264, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
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