Minimum wages and excessive effort supply

It is well-known that, in static models, minimum wages generate positive worker rents and, consequently, inefficiently low effort. We show that this result does not necessarily extend to a dynamic context. The reason is that, in repeated employment relationships, firms may exploit workers' futu...

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Veröffentlicht in:	Economics letters 2010-09, Vol.108 (3), p.341-344
Hauptverfasser:	Krakel, M, Schottner, Anja
Format:	Artikel
Sprache:	eng
Schlagworte:	Bonuses Bonuses Limited liability Minimum wages Employment Limited liability Minimum wages Rent Work incentives
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Beschreibung
Zusammenfassung:	It is well-known that, in static models, minimum wages generate positive worker rents and, consequently, inefficiently low effort. We show that this result does not necessarily extend to a dynamic context. The reason is that, in repeated employment relationships, firms may exploit workers' future rents to induce excessively high effort.
ISSN:	0165-1765 1873-7374
DOI:	10.1016/j.econlet.2010.06.004