Minimum Wages and Excessive Effort Supply

Matthias Kräkel and Anja Schöttner

No 8/2009, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

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)
Date: 2009
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Related works:
Journal Article: Minimum wages and excessive effort supply (2010)
Working Paper: Minimum Wages and Excessive Effort Supply (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bonedp:82009

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