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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' future rents to induce excessively high effort.
Year of publication:
2010
Authors: Kräkel, Matthias ; Schöttner, Anja
Published in:
Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 108.2010, 3, p. 341-344
Publisher: Elsevier
Subject: Bonuses Limited liability Minimum wages
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Type of publication: Article
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Persistent link: https://www.econbiz.de/10008866981
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