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We analyse the effect of the voluntary adoption of a living wage on firms operating in product markets in which consumption behaviour is at least partly determined by reputational concerns for ethical firm behaviour. We show without recourse to morality or efficiency-wage theories that the adoption of a living wage policy may increase consumer welfare as well as producer surplus through the segmentation of a previously homogenous product market. In particular, we demonstrate that it may serve a firm’s profit maximisation interest to voluntarily adopt a living wage.
|Place of Publication||York|
|Publisher||RePEc ; DERS Discussion Papers (University of York)|
|Number of pages||15|
|Publication status||Published - Oct 2014|
- Living wage, Signalling, Reputation