Minimum Wages and Excessive Effort Supply

Matthias Kräkel () and Anja Schöttner

Bonn Econ Discussion Papers from University of Bonn, Germany

Abstract: It is well-known that, in static models, minimum wages generate positive worker rents and, consequently, ine?ciently low effort. We show that this result does not necessarily extend to a dynamic context. The reason is that, in repeated employment relationships, ?rms may exploit workers’ future rents to induce excessively high effort.

Keywords: bonuses; limited liability; minimum wages (search for similar items in EconPapers)
JEL-codes: D82 D86 J33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta and nep-lab
Date: 2009-06
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