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Title:Spillover effects of minimum wages: Theory and experimental evidence PDF Logo
Authors:Dittrich, Marcus
Knabe, Andreas
Leipold, Kristina
Issue Date:2011
Series/Report no.:CESifo working paper: Labour Markets 3576
Abstract:We study the spillover effects of minimum wages in a laboratory experiment. In a bilateral firm-worker bargaining setting, we find that the introduction of a minimum wage exerts upward pressure on wages even if the minimum wage is too low to be a binding restriction. Furthermore, raising the minimum wage to a binding level increases the bargained wage above the new minimum wage level. While the Nash solution cannot explain the existence of spillover effects, the Kalai-Smorodinsky solution yields results that are qualitatively more in line with our experimental findings.
Subjects:minimum wage
bargaining
Kalai-Smorodinsky solution
labor market experiments
JEL:C71
C91
J38
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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