We show that a minimum wage introduced in the presence of asymmetric information about worker productivities will lead to lower unemployment levels than predicted by the standard labour market model with heterogeneous labour and symmetric information

We derive the optimal contract between a principal and a liquidity-constrained agent in a stochastically repeated environment. The contract comprises a court-enforceable explicit bonus rule and an implicit fixed salary promise that must be self-enforcing. Since the agent's rent increases with...

Do minimum wages reduce in-work-poverty and wage inequality? Or can alternative policies do better? We evaluate theses issues for the exemplary case of Germany that suffers from high unemployment among low-skilled workers and rising wage dispersion at the bottom of the wage distribution. We...

Using data from the 2006 wave of the German Socio-Economic Panel (GSOEP), this paper analyzes how a minimum wage affects employment, wage inequality, public expenditures, and aggregate income in the low-wage sector. It is shown that a statutory minimum wage of EUR 7.50 per hour would cost...

This paper analyzes the implications of effective taxation of labor for profits and, hence, the location decision of a multinational enterprise. We set up a stylized partial equilibrium model and, presuming that worker effort is a function of net wages, assume that a higher employee-borne tax...

We provide evidence on how two important types of institutions - dismissal barriers, and bonus pay - affect contract enforcement behavior in a market with incomplete contracts and repeated interactions. Dismissal barriers are shown to have a strong negative impact on worker performance, and...

This paper explores the existence of downward real wage rigidity (DRWR) in 19 OECD countries, over the period 1973-1999, using data for hourly nominal earnings at industry level. Based on a nonparametric statistical method, which allows for country and year specific variation in both the median...

A number of recent studies have documented extensive downward nominal wage rigidity (DNWR) for job stayers in many OECD countries. However, DNWR for individual workers may induce downward rigidity or "a floor" for the aggregate wage growth at positive or negative levels. Aggregate wage growth...

Previous empirical studies on the effect of age on productivity and wages find contradicting results. Some studies find that if workers grow older there is an increasing gap between productivity and wages, i.e. wages increase with age while productivity does not or does not increase at the same...

International differences in teacher quality are commonly hypothesized to be a key determinant of the large international student performance gaps, but lack of consistent quality measures has precluded testing this. Using unique assessment data, we construct country-level measures of teacher...