It is well-known that, in static models, minimum wages generate positive worker rents and, consequently, ineffciently low effort. We show that this result does not necessarily extend to a dynamic context. The reason is that, in repeated employment relationships, firms may exploit workers’ future rents to induce excessively high effort. Creation-Date: 2009-07
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Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number
264.
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