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Kräkel, Matthias and Schöttner, Anja (June 2009): Minimum Wages and Excessive Effort Supply. SFB/TR 15 Discussion Paper No. 264 [PDF, 191kB]


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.

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