Noncompliance and the Effects of the Minimum Wage on Hours and Welfare in Competitive Labor Markets

Leif Danziger ()

No CESifo Working Paper No. 2786, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper shows that increases in the minimum wage rate can have ambiguous effects on the working hours and welfare of employed workers in competitive labor markets. The reason is that employers may not comply with the minimum wage legislation and instead pay a lower subminimum wage rate. If workers are risk neutral, we prove that working hours and welfare are invariant to the minimum wage rate. If workers are risk averse and imprudent (which is the empirically likely case), then working hours decrease with the minimum wage rate, while their welfare may increase.

Keywords: noncompliance; minimum wage; working hours; welfare; competitive labor markets (search for similar items in EconPapers)
JEL-codes: J38 (search for similar items in EconPapers)
Date: 2009
View list of references View citations in EconPapers

Downloads: (external link)
http://www.cesifo.de/DocCIDL/cesifo1_wp2786.pdf (application/pdf)

Related works:
Working Paper: Noncompliance and the Effects of the Minimum Wage on Hours and Welfare in Competitive Labor Markets (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ces:ceswps:_2786

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Group Munich
Address: Poschingerstrasse 5, 81679 Munich
Series data maintained by Julio Saavedra ().