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Title:Multiple Equilibria and Minimum Wages in Labor Markets with Informational Frictions and Heterogeneous Production Technologies PDF Logo
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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