Noncompliance Behavior of Risk-Averse Firms Under the Minimum Wage Law

Yang-Ming Chang

Public Finance Review, 1992, vol. 20, issue 3, 390-401

Abstract: This article is concerned with the law evasion (reduced wages) and law avoidance (modified employment) aspects of noncompliance behavior by risk-averse firms under the minimum wage law. It demonstrates that the adverse disemployment effects of a legal minimum wage under the conventional "full compliance" assumption should be modified by an "employment effect" of noncompliance, although it is shown that risk-averse violating firms would employ less labor than they would if they were risk-neutral. Findings suggest that the most effective strategy for motivating risk-averse firms to comply with minimum wage laws is imposing stiffer penalty fees.

Date: 1992
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:20:y:1992:i:3:p:390-401

DOI: 10.1177/109114219202000307

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