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Compliance with the Institutional Wage in Dualistic Models

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  • Ana Paula Martins

Abstract

This research extends simple two-sector models in order to inquire the impact of the extent of coverage or enforcement of minimum wage legislation in one of the sectors on the equilibrium outcome. Two versions of institutional wage avoidance are presented. They may be seen as representing different institutional detection rules: one working through worker complaint, the other through firm sampling inspection (and enforcement) by the legal system. Both cases are modelled as enlargements of two dualistic models: Harris-Todaro (the wage in the other sector is market determined) and Bhagwati-Hamada (the wage in the other sector is institutionally fixed and coverage is complete). Impact on population flows of changes in degree of coverage (compliance) is also confronted with the effect of a change in the institutional wage for each scenario.

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Paper provided by Economics and Econometrics Research Institute (EERI), Brussels in its series EERI Research Paper Series with number EERI_RP_2011_15.

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Date of creation: 15 Nov 2011
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Handle: RePEc:eei:rpaper:eeri_rp_2011_15

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Related research

Keywords: Migration; Mobility; Minimum Wages; Segmented Labor Markets; Informal Sector; Regional Labor Markets; Dualistic Models; Coverage.;

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References

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  1. Chang, Yang-Ming & Ehrlich, Isaac, 1985. "On the Economics of Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 84-91, February.
  2. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
  3. Anne O. Krueger, 1983. "Trade and Employment in Developing Countries, 3: Synthesis and Conclusions," NBER Books, National Bureau of Economic Research, Inc, number krue83-1, May.
  4. Grenier, Gilles, 1982. "On Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 184-87, February.
  5. Victor Ginsburgh & Philippe Michel & Fiorella Padoa-Schioppa & Pierre Pestieau, 1987. "Macroeconomic policy in the presence of an irregular sector," ULB Institutional Repository 2013/3323, ULB -- Universite Libre de Bruxelles.
  6. Srinivasan, T. N. & Bhagwati, Jagdish, 1975. "Alternative policy rankings in a large, open economy with sector-specific, minimum wages," Journal of Economic Theory, Elsevier, vol. 11(3), pages 356-371, December.
  7. Ana Paula Martins, 2010. "Splitting Games: Nash Equilibrium and the Optimisation Problem," EERI Research Paper Series EERI_RP_2010_36, Economics and Econometrics Research Institute (EERI), Brussels.
  8. Charles Brown & Curtis Gilroy & Andrew Kohen, 1982. "The Effect of the Minimum Wage on Employment and Unemployment: A Survey," NBER Working Papers 0846, National Bureau of Economic Research, Inc.
  9. Todaro, Michael P., 1976. "Urban job expansion, induced migration and rising unemployment : A formulation and simplified empirical test for LDCs," Journal of Development Economics, Elsevier, vol. 3(3), pages 211-225, September.
  10. Ana Paula Martins, 2002. "Unemployment Insurance and Union Behavior: Comparison of Some Paradigms and Endogenous Membership," EERI Research Paper Series EERI_RP_2002_06, Economics and Econometrics Research Institute (EERI), Brussels.
  11. Svejnar, J., 1984. "Bargaining power, fear of disagreement and wage settlements: theory and evidence from U.S. industry," CORE Discussion Papers 1984037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Ana Paula Martins, 2010. "Frontier Techniques: Contrasting the Performance of (Single-) Truncated Order Regression Methods and Replicated Moments," EERI Research Paper Series EERI_RP_2010_37, Economics and Econometrics Research Institute (EERI), Brussels.
  13. McDonald, Ian M & Solow, Robert M, 1985. "Wages and Employment in a Segmented Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1115-41, November.
  14. Ana Paula Martins, 2011. "Compliance with the Institutional Wage in Dualistic Models," EERI Research Paper Series EERI_RP_2011_15, Economics and Econometrics Research Institute (EERI), Brussels.
  15. Martins, Ana Paula, 2008. "Bilateral mobility in dualistic models," Economic Modelling, Elsevier, vol. 25(3), pages 391-410, May.
  16. Corden, W M & Findlay, Ronald, 1975. "Urban Unemployment, Intersectoral Capital Mobility and Development Policy," Economica, London School of Economics and Political Science, vol. 42(165), pages 59-78, February.
  17. Ana Paula Martins, 2006. "On Simple Conditions for Mixed Equilibria in Dualistic Models. Part II: Degree of Coverage," EERI Research Paper Series EERI_RP_2006_04, Economics and Econometrics Research Institute (EERI), Brussels.
  18. Bhagwati, Jagdish & Hamada, Koichi, 1974. "The brain drain, international integration of markets for professionals and unemployment : A theoretical analysis," Journal of Development Economics, Elsevier, vol. 1(1), pages 19-42, April.
  19. Ana Paula Martins, 2011. "Segmented Life-cycle Labor Markets – Portuguese Evidence," EERI Research Paper Series EERI_RP_2011_05, Economics and Econometrics Research Institute (EERI), Brussels.
  20. Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S87-104, August.
  21. Aumann, Robert J & Kurz, Mordecai, 1977. "Power and Taxes," Econometrica, Econometric Society, vol. 45(5), pages 1137-61, July.
  22. Ashenfelter, Orley & Smith, Robert S, 1979. "Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 333-50, April.
  23. Ana Paula Martins, 2002. "Reconciling the Nash and Kalai-Smorodinsky Cooperative Solutions: Generalized Maximands of CES Form," EERI Research Paper Series EERI_RP_2002_05, Economics and Econometrics Research Institute (EERI), Brussels.
  24. Ana Paula Martins, 2006. "On Simple Conditions for Mixed Equilibria in Dualistic Models. Part I: Degree of Mobility," EERI Research Paper Series EERI_RP_2006_03, Economics and Econometrics Research Institute (EERI), Brussels.
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  1. Ana Paula Martins, 2011. "Compliance with the Institutional Wage in Dualistic Models," EERI Research Paper Series EERI_RP_2011_15, Economics and Econometrics Research Institute (EERI), Brussels.

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