Entrepreneurship and Compliance With Minimum Wage Law

Jellal, Mohamed (2009): Entrepreneurship and Compliance With Minimum Wage Law.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Minimum Wage Legislation; Informal Sector in LDCs; firms Heterogeneity;Lateral Contracts; Stochastic Monitoring; Hiring Policies
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; J - Labor and Demographic Economics > J8 - Labor Standards: National and International > J88 - Public Policy

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