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TURNING A BLIND EYE? COMPLIANCE TO MINIMUM WAGES AND EMPLOYMENT

Andrea Garnero and Claudio Lucifora ()

No def085, DISCE - Working Papers del Dipartimento di Economia e Finanza from Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE)

Abstract: In this paper, we explore the relationship between non-compliance with bargained minimum wages and employment. We illustrate the role of labour courts with respect to the Constitutional provision of “fair” wage and sketch a model in which firms choose their desired levels of employment and non-compliance. We show that when employers internalize the expected costs of non-compliance, the effect of deviating from the bargained minimum wages on employment levels are modest, or null. Using data from the Italian LFS, we find evidence of a positive, but small, trade-off between non-compliance and employment. We discuss the policy implications of these findings for wage bargaining, also considering the costs that “turning a blind eye” to non-compliance implies for the Italian system of industrial relations.

Keywords: collective bargaining; sectoral minimum wages; compliance. (search for similar items in EconPapers)
JEL-codes: J08 J31 J52 J83 (search for similar items in EconPapers)
Pages: 34
Date: 2020-01
New Economics Papers: this item is included in nep-eur and nep-lab
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http://dipartimenti.unicatt.it/economia-finanza-def085.pdf First version, 2020 (application/pdf)

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