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| Title: | | Multiple Equilibria and Minimum Wages in Labor Markets with Informational Frictions and Heterogeneous Production Technologies  |
| Authors: | | van den Berg, Gerard J. |
| Issue Date: | | 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 |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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| dp806.pdf | | 464.51 kB | Adobe PDF |
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