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Title:Minimum Wages and Union Bargaining in a Dual Labour Market PDF Logo
Authors:Dittrich, Marcus
Issue Date:2007
Series/Report no.:Dresden discussion paper in economics 13/07
Abstract:The paper analyses the links between a binding minimum wage and union bargaining. A dual labour market model is developed where the first sector outcome is characterised by bargaining between unions and firms, while in the second sector firms have to pay a statutory minimum wage. It is shown that a minimum wage increase has negative employment effects only if the bargaining outcome is described by the Nash solution. However, this result does not hold if the Kalai-Smorodinsky solution is applied to model union bargaining. A higher minimum wage can then lead to more employment in the unionised sector and to a lower unemployment rate.
Subjects:Minimum wages
union bargaining
Nash approach
Kalai-Smorodinsky solution
JEL:J30
C78
J51
Document Type:Working Paper
Appears in Collections:Dresden Discussion Paper Series in Economics, Faculty of Business and Economics, TU Dresden

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