Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/30613
Authors: 
Danziger, Leif
Year of Publication: 
2009
Series/Report no.: 
CESifo Working Paper 2740
Abstract: 
The minimum wage rate has been introduced in many countries as a means of alleviating the poverty of the working poor. This paper shows, however, that an imperfectly enforced minimum wage rate causes small firms to face an upward-sloping labor supply schedule. Since this turns these firms into endogenous monopsonists, the minimum wage rate has the perverse effect of reducing employment in small firms as well as what these firms offer their workers. Thus, if there are only small firms, the minimum wage rate makes all workers that would be employed in the absence of a minimum wage rate worse off.
Subjects: 
endogenous monopsony
minimum wage
noncompliance
small firms
JEL: 
J38
Document Type: 
Working Paper

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