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| Author: | Sampson, A. A. Simmons, R. |
| Title: | The minimum wage in an adverse selection economy |
| Journal: | Oxford Economic Papers
2002 : JAN, VOL. 54:1, p. 150-159 |
| Index terms: | Labour economics Labour law Pay Legislation |
| Language: | eng |
| Abstract: | The authors examine the welfare implications of minium wage legislation in a simple two-sector model, in which greater effort is required to produce in the higher productivity sector and individual ability is private. An adverse selection distortion e arises so that, without a minimum wage, too many workers work in the primary sector because of the high wage based on average ability. These workers produce relatively little, while exerting effort. The paper shows that a minimum wage, in the low-productivity sector, can correct this distortion but may lower welfare. |
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