Wage traps
Type
fundamental research project
Start Date
October 1, 2007
End Date
December 31, 2010
Status
ongoing
Keywords
subsistence income
wage trap
poverty
labour supply
economic development
growth
child labor
minimum wages
income patterns
economic growth
Description
The project explores the conditions under which wage traps, a specific form of labour market failure that appears feasible near subsistence-level labour incomes, may occur and to what extent wage traps may contribute to insufficient development dynamics in poor countries and to a widening of the income distribution in developed economies. In a first step, a partial analysis of wage-trapped labour markets is attempted. In a second step, wage-trapped labour markets will be integrated into conventional and endogenous growth models, and the potential for this type of labour market failure to explain poverty traps will be explored.
Leader contributor(s)
Funder
Topic(s)
subsistence income
wage trap
poverty
labour supply
economic development
growth
child labor
minimum wages
income patterns
economic growth
Method(s)
Mathematical models
Range
Institute/School
Range (De)
Institut/School
Division(s)
Eprints ID
41462
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Item type:Publication, Wage traps as a cause of illiteracy, child labor, and extreme poverty(2008-01-08) - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Labor Market Integration and Its Effect on Child LaborThis note demonstrates that when developing countries remove barriers to migration and integrate their labor markets, children may be driven out of schools and into informal or paid employment in the comparatively rich countries. In industrialized countries, the same mechanism might drive families into social security or government-subsidized jobs [http://ideas.repec.org/p/usg/econwp/201123.html Volltext herunterladen]Type:discussion paperIssue:1123 - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Labor Market Integration and Its Effect on Child LaborThis note demonstrates that when developing countries remove barriers to migration and integrate their labor markets, children may be driven out of schools and into informal or paid employment in the comparatively rich countries. In industrialized countries, the same mechanism might drive families into social security or government-subsidized jobsType:journal articleJournal:Atlantic Economic JournalVolume:39Issue:2 - Some of the metrics are blocked by yourconsent settings
Item type:Publication, - Some of the metrics are blocked by yourconsent settings
Item type:Publication, Wage traps as a cause of illiteracy, child labor, and extreme povertyWhen labor incomes approach subsistence levels, the labor supply curve slopes outward, because the fight for survival mandates households to look for longer work hours in response to falling wage rates. We explore conditions under which near-subsistence scenarios may imply wage traps, labor market failures that can be the cause of undernourishment, illiteracy, and child labor. After stating general conditions under which wage traps occur, we look at specific production functions typically employed in quantitative analyses of growth and development. We find that standard Cobb-Douglas production functions do not permit wage traps, whereas CES functions do. Beyond that it turns out that when subsistence requirements increase with work hours, and when work effort rises with the wage rate, up to the efficiency-wage threshold, wage traps become more likely. Policy measures such as bans on child labor, implementation of minimum wage laws, or the establishment of labor unions may quite effectively improve conditions in wage-trapped labor marketsType:journal articleJournal:Research in EconomicsVolume:65Issue:3Scopus© Citations 5