IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/39499.html
   My bibliography  Save this paper

A theory of compliance with minimum wage legislation

Author

Listed:
  • Jellal, Mohamed

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

Suggested Citation

  • Jellal, Mohamed, 2012. "A theory of compliance with minimum wage legislation," MPRA Paper 39499, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:39499
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/39499/1/MPRA_paper_39499.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Yaniv, Gideon, 1994. "Complaining about noncompliance with the minimum wage law," International Review of Law and Economics, Elsevier, vol. 14(3), pages 351-362, September.
    2. Grenier, Gilles, 1982. "On Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 184-187, February.
    3. Azam, Jean-Paul, 1992. "The Agricultural Minimum Wage and Wheat Production in Morocco (1971-89)," Journal of African Economies, Centre for the Study of African Economies, vol. 1(2), pages 171-191, August.
    4. Yossi Tobol, 2005. "Wage discrimination as an illegal behavior," Economics Bulletin, AccessEcon, vol. 10(4), pages 1-10.
    5. George J. Stigler, 1974. "The Optimum Enforcement of Laws," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 55-67, National Bureau of Economic Research, Inc.
    6. repec:ebl:ecbull:v:10:y:2005:i:4:p:1-10 is not listed on IDEAS
    7. Brown, Charles, 1988. "Minimum Wage Laws: Are They Overrated?," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 133-145, Summer.
    8. repec:ebl:ecbull:v:10:y:2004:i:9:p:1-7 is not listed on IDEAS
    9. Cahuc, Pierre & Michel, Philippe, 1996. "Minimum wage unemployment and growth," European Economic Review, Elsevier, vol. 40(7), pages 1463-1482, August.
    10. Yaniv, Gideon, 2001. "Minimum Wage Noncompliance and the Employment Decision," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 596-603, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simplice A. Asongu & Mohamed Jellal, 2014. "A Theory of Compliance with Minimum Wage Law," Research Africa Network Working Papers 14/008, Research Africa Network (RAN).
    2. repec:ebl:ecbull:v:10:y:2007:i:4:p:1-7 is not listed on IDEAS
    3. Yang-Ming Chang & Bhavneet Walia, 2007. "Wage discrimination and partial compliance with the minimum wage law," Economics Bulletin, AccessEcon, vol. 10(4), pages 1-7.
    4. Jellal, Mohamed, 2009. "Entrepreneurship and Compliance With Minimum Wage Law," MPRA Paper 17156, University Library of Munich, Germany.
    5. Badaoui, Eliane & Walsh, Frank, 2022. "Productivity, non-compliance and the minimum wage," Journal of Development Economics, Elsevier, vol. 155(C).
    6. Clemens, Jeffrey & Strain, Michael R., 2022. "Understanding “Wage Theft”: Evasion and avoidance responses to minimum wage increases," Labour Economics, Elsevier, vol. 79(C).
    7. Yaniv, Gideon, 2006. "On the employment effect of noncompliance with the minimum wage law," International Review of Law and Economics, Elsevier, vol. 26(4), pages 557-564, December.
    8. repec:ebl:ecbull:v:10:y:2004:i:9:p:1-7 is not listed on IDEAS
    9. Dinkelman, Taryn & Ranchhod, Vimal, 2012. "Evidence on the impact of minimum wage laws in an informal sector: Domestic workers in South Africa," Journal of Development Economics, Elsevier, vol. 99(1), pages 27-45.
    10. ArnabK. Basu & NancyH. Chau & Ravi Kanbur, 2010. "Turning a Blind Eye: Costly Enforcement, Credible Commitment and Minimum Wage Laws," Economic Journal, Royal Economic Society, vol. 120(543), pages 244-269, March.
    11. Goerke, Laszlo & Pannenberg, Markus, 2023. "Minimum Wage Non-compliance: The Role of Co-determination," IZA Discussion Papers 16621, Institute of Labor Economics (IZA).
    12. repec:pri:rpdevs:dinkelman_ranchhod_minwages_0710 is not listed on IDEAS
    13. repec:ebl:ecbull:v:10:y:2005:i:4:p:1-10 is not listed on IDEAS
    14. Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix, 2015. "Partial minimum wage compliance," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-20, December.
    15. Danziger, Leif, 2010. "Endogenous monopsony and the perverse effect of the minimum wage in small firms," Labour Economics, Elsevier, vol. 17(1), pages 224-229, January.
    16. Mario Bossler & Ursula Jaenichen & Simeon Schächtele, 2022. "How effective are enforcement measures for compliance with the minimum wage? Evidence from Germany," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 43(2), pages 943-971, May.
    17. Pierre Cahuc & Philippe Michel, 1995. "Salaire minimum, croissance et bien-être," Revue Économique, Programme National Persée, vol. 46(3), pages 585-594.
    18. Danziger, Leif, 2009. "Noncompliance and the effects of the minimum wage on hours and welfare in competitive labor markets," Labour Economics, Elsevier, vol. 16(6), pages 625-630, December.
    19. Toshiki Tamai, 2009. "Inequality, unemployment, and endogenous growth in a political economy with a minimum wage," Journal of Economics, Springer, vol. 97(3), pages 217-232, July.
    20. Katerina Sherstyuka & Dolgorsuren Dorjb & Gerard Russo, 2014. "Health Insurance and the Labor Market with Wage Rigidities: Insights from a Laboratory Experiment," Working Papers 201427, University of Hawaii at Manoa, Department of Economics.
    21. Andrés Ham, 2015. "Minimum wage violations in Honduras," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-19, December.
    22. Christian Ragacs, 2002. "Warum Mindestlöhne die Beschäftigung nicht reduzieren müssen," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 28(1), pages 59-84.
    23. M. Martin Boyer, 2007. "Resistance (to Fraud) Is Futile," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(2), pages 461-492, June.
    24. Jensen, Sissel & Kvaløy, Ola & Olsen, Trond E. & Sorgard, Lars, 2013. "Crime and punishment: When tougher antitrust enforcement leads to higher overcharge," Discussion Paper Series in Economics 4/2013, Norwegian School of Economics, Department of Economics.

    More about this item

    Keywords

    Minimum wage legislation; Employment ; Informal sector in LDCs ; Government Policy;
    All these keywords.

    JEL classification:

    • J8 - Labor and Demographic Economics - - Labor Standards
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:39499. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.