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A theory of compliance with minimum wage legislation

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  • Jellal, Mohamed

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

Suggested Citation

  • Jellal, Mohamed, 2012. "A theory of compliance with minimum wage legislation," MPRA Paper 39499, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:39499
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    References listed on IDEAS

    as
    1. Yaniv, Gideon, 1994. "Complaining about noncompliance with the minimum wage law," International Review of Law and Economics, Elsevier, vol. 14(3), pages 351-362, September.
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    5. Cahuc, Pierre & Michel, Philippe, 1996. "Minimum wage unemployment and growth," European Economic Review, Elsevier, vol. 40(7), pages 1463-1482, August.
    6. Yossi Tobol, 2005. "Wage discrimination as an illegal behavior," Economics Bulletin, AccessEcon, vol. 10(4), pages 1-10.
    7. George J. Stigler, 1974. "The Optimum Enforcement of Laws," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 55-67, National Bureau of Economic Research, Inc.
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    9. Brown, Charles, 1988. "Minimum Wage Laws: Are They Overrated?," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 133-145, Summer.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Minimum wage legislation; Employment ; Informal sector in LDCs ; Government Policy;
    All these keywords.

    JEL classification:

    • J8 - Labor and Demographic Economics - - Labor Standards
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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