Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/20051
Authors: 
van den Berg, Gerard J.
Year of Publication: 
2003
Series/Report no.: 
IZA Discussion paper series 806
Abstract: 
It is often argued that a mandatory minimum wage is binding only if the wage density displays a spike at it. In this paper we analyze a model with search frictions and heterogeneous production technologies, in which imposition of a minimum wage affects wages even though, after imposition, the lowest wage in the market exceeds the minimum wage. The model has multiple equilibria as a result of the fact that the reservation wage of the unemployed and the lowest production technology in use affect each other. Imposition of a minimum wage may improve social welfare.
Subjects: 
wages
productivity
job search
unemployment
imperfect information
equilibrium
labor market policy
matching
congestion
JEL: 
J42
D83
J3
C72
J6
Document Type: 
Working Paper

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