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Title:The Endogenous Determination of Minimum Wage PDF Logo
Authors:Epstein, Gil S.
Nitzan, Shmuel
Issue Date:1999
Series/Report no.:IZA Discussion paper series 73
Abstract:In this paper we study the endogenous determination of minimum wage employing a political-economic game-theoretic approach. A major objective of the paper is to clarify the crucial role of the strength of the workers? union and of political culture on the determination of the minimum wage. In general, the equilibrium minimum wage differs from that postulated in the literature. In our uncertain environment the optimal minimum wage from the workers? union point of view is lower than the level that maximizes its objective function in a certain environment where there is no opposition to the proposed minimum wage. We establish that a political culture that assigns a positive weight to the public well being can give rise to a wage that equals or exceeds these levels.
Subjects:Minimum wage
endogenous determination
political culture
public policy
JEL:J38
J5
J3
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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