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Minimum Wages and Unemployment Benefits in a Unionized Economy: A Game-Theoretic Approach

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Author Info

  • Marcus Dittrich

    (Chemnitz University of Technology, Faculty of Economics and Business Administration)

Abstract

This paper aims at contributing to the labour market effects of minimum wages and unemployment benefits from a game-theoretic viewpoint. In a dual labour market model, 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. The model shows that the effects of minimum wages differ from those of unemployment benefits. Moreover, we show that the labour market outcome depends on the underlying game-theoretic bargaining solution. That is, the labour market effects of unemployment benefits and minimum wages in the Nash bargaining solution differ substantially from the effects if bargaining follows the Kalai-Smorodinsky solution.

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Bibliographic Info

Article provided by Society for AEF in its journal Annals of Economics and Finance.

Volume (Year): 11 (2010)
Issue (Month): 2 (November)
Pages: 209-229

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Handle: RePEc:cuf:journl:y:2010:v:11:i:2:p:209-229

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Related research

Keywords: Nash solution; Kalai-Smoro-dinsky solution; Union bargaining; Minimum wages; Unemployment benefits;

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References

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  2. Gerard J. van den Berg, 2003. "Multiple Equilibria and Minimum Wages in Labor Markets with Informational Frictions and Heterogeneous Production Technologies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1337-1357, November.
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Cited by:
  1. L'Haridon, Olivier & Malherbet, Franck & Pérez-Duarte, Sébastien, 2010. "Does bargaining matter in the small firm's matching Mmodel?," Les Cahiers de Recherche 938, HEC Paris.

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