Entrepreneurship and Compliance With Minimum Wage Law
AbstractIn 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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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 17156.
Date of creation: 04 Sep 2009
Date of revision:
Minimum Wage Legislation; Informal Sector in LDCs; firms Heterogeneity; Lateral Contracts; Stochastic Monitoring; Hiring Policies;
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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