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Entrepreneurship And Compliance With Minimum Wage Law

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Executive Summary

In this paper, the authors introduce firm heterogeneity in the context of a model of non-compliance with minimum wage legislation. The introduction of heterogeneity in the ease with which firms can be monitored for non compliance allows them to show that non-compliance will persist in sectors which are relatively difficult to monitor, despite the government implementing non - stochastic monitoring. Moreover, they 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.

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