Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/123615
Authors: 
Asongu, Simplice A.
Jellal, Mohamed
Year of Publication: 
2014
Series/Report no.: 
AGDI Working Paper WP/14/008
Abstract: 
Purpose – In this paper, we introduce firm heterogeneity in the context of a model of non-compliance with minimum wage legislation. Design/methodology/approach – Theoretical modeling under government compliance policy and wages & employment under non compliance. Findings – The introduction of heterogeneity in the ease with which firms can be monitored for non compliance allows us to show that non-compliance will persist in sectors which are relatively difficult to monitor, despite the government implementing non stochastic monitoring. Moreover, we show that the incentive not to comply is an increasing function of the level of the minimum wage and increasing function of the gap between the minimum wage and the competitive wage rate. Originality/value – We have shown why non compliance persists in certain sectors of activity despite frequent inspection by government agencies.
Subjects: 
Minimum
wage
legislation
informal
sector
in
LDCs
JEL: 
H26
O17
Document Type: 
Working Paper

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