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Minimum wage restrictions and employee effort in incomplete labor markets: An experimental investigation

  • Owens, Mark F.
  • Kagel, John H.

A minimum wage raises average wages along with modest increases in employees' average effort levels, generating a Pareto improvement in social welfare. The minimum wage reduces effort in the neighborhood of the minimum, but has no systematic effect on effort levels at higher wages. As a consequence average effort increases modestly with a minimum wage as it raises average wages. Similar results are reported within groups, both when introducing and eliminating a minimum wage, although the within group effects of introducing a minimum wage are stronger than dropping it.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 73 (2010)
Issue (Month): 3 (March)
Pages: 317-326

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Handle: RePEc:eee:jeborg:v:73:y:2010:i:3:p:317-326
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