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Title:Labor Market Institutions and the Employment-Productivity Trade-Off : A Wage Posting Approach PDF Logo
Authors:Chéron, Arnaud
Hairault, Jean-Olivier
Langot, François
Issue Date:2004
Series/Report no.:IZA Discussion paper series 1364
Abstract:This paper analyzes the implications of labor market institutions and policies on the employment-labor productivity trade-off. We consider an equilibrium search model with wage posting and specific human capital investment where unemployment and the distribution of both wages and productivity are endogenous. By means of simulations of this model estimated on French data, we show that the minimum wage allows a high production level to be reached by inducing increased training investment, even if its optimal level is weaker. Considering the payroll tax subsidies implemented to lower the labor cost without removing the minimum wage legislation, we show that this policy has been welfare improving, and has been relatively well managed by spreading subsidies over a large range of wages, and not only at the minimum wage level.
Subjects:employment
productivity
wage posting
labor costs
JEL:C51
J38
J31
J24
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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