In this paper we study the endogenous determination of minimum wage employing a political-economic game-theoretic approach. A major objective of the paper is to clarify the crucial role of the strength of the workers' union and of political culture on the determination of the minimum wage. In general, the equilibrium minimum wage differs from that postulated in the literature. In our uncertain environment the optimal minimum wage from the workers' union point of view is lower than the level that maximizes its objective function in a certain environment where there is no opposition to the proposed minimum wage. We establish that a political culture that assigns a positive weight to the public wellbeing can give rise to a wage that equals or exceeds these levels.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
2319.
Find related papers by JEL classification: J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Other versions:
Gene M. Grossman & Elhanan Helpman, 1992.
"Protection For Sale,"
NBER Working Papers
4149, National Bureau of Economic Research, Inc.
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