Entrepreneurship and Compliance With Minimum Wage Law

Mohamed Jellal ()

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Minimum Wage Legislation; Informal Sector in LDCs; firms Heterogeneity; Lateral Contracts; Stochastic Monitoring; Hiring Policies (search for similar items in EconPapers)
JEL-codes: J31 J88 O17 (search for similar items in EconPapers)
Date: 2009-09-04
New Economics Papers: this item is included in nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:17156

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