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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

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File URL: http://mpra.ub.uni-muenchen.de/39499/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39499.

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Date of creation: 2012
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Handle: RePEc:pra:mprapa:39499

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Keywords: Minimum wage legislation; Employment ; Informal sector in LDCs ; Government Policy;

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  1. 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.
  2. Cahuc, Pierre & Michel, Philippe, 1996. "Minimum wage unemployment and growth," European Economic Review, Elsevier, vol. 40(7), pages 1463-1482, August.
  3. Azam, Jean-Paul, 1992. "The Agricultural Minimum Wage and Wheat Production in Morocco (1971-89)," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 1(2), pages 171-91, August.
  4. 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.
  5. 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.
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