Productivity, non-compliance and the minimum wage

Eliane Badaoui and Frank Walsh

(forthcoming in the Journal of Development Economics and available online at:
The paper: 
•Shows that output per worker is less than the minimum wage for many developing
country firms so that they could not comply with the minimum wage
•Develops a model rationalising why governments may implicitly tolerate non-
compliance amongst low productivity firms, where inspections of firms by labour
inspectors are instigated by worker complaints
•Documents that worker complaints are the primary instigator of minimum wage