Minimum Wages and Excessive Effort Supply

Kräkel, Matthias und Schöttner, Anja (June 2009): Minimum Wages and Excessive Effort Supply. SFB/TR 15 Discussion Paper No. 264

Abstract

It is well-known that, in static models, minimum wages generate positive worker rents and, consequently, inefficiently low e?ort. 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.

• Item Type: Paper
• Keywords: bonuses; limited liability; minimum wages
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > B4 - Die Gestaltung von Turnieren im Rahmen der Corporate Governance
• Subjects: 300 Social sciences > 330 Economics
• Language: English