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Entrepreneurship and Compliance With Minimum Wage Law

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Author Info
Jellal, Mohamed

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Abstract

In this paper, we introduce firm heterogeneity in the context of a model of non-compliance with minimum wage legislation. The introduction of heterogeneity in the ease with which firms can be monitored for non compliance allows us to show that non-compliance will persist in sectors which are relatively difficult to monitor, despite the government implementing non –stochastic monitoring. Moreover, we show that the incentive not to comply is an increasing function of the level of the minimum wage and increasing function of the gap between the minimum wage and the competitive wage rate.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17156.

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Date of creation: 04 Sep 2009
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Handle: RePEc:pra:mprapa:17156

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Related research
Keywords: Minimum Wage Legislation; Informal Sector in LDCs; firms Heterogeneity; Lateral Contracts; Stochastic Monitoring; Hiring Policies;

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Find related papers by JEL classification:
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy

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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. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  3. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May. [Downloadable!] (restricted)
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  4. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169. [Downloadable!] (restricted)
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  5. Yossi Tobol, 2005. "Wage discrimination as an illegal behavior," Economics Bulletin, Economics Bulletin, vol. 10(4), pages 1-10. [Downloadable!]
  6. 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. [Downloadable!] (restricted)
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