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Good Jobs versus Bad Jobs: Theory and Some Evidence

Author

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  • Acemoglu, Daron

Abstract

This paper offers a model of the interaction between composition of jobs and labour market regulation. Ex-post rent-sharing due to search frictions implies that ‘good’ jobs which have higher creation costs must pay higher wages. This wage differential distorts the composition of jobs, and in the unregulated equilibrium there are too many bad jobs relative to the number of good jobs. Minimum wages and unemployment insurance encourage workers to wait for higher wages, and therefore induce firms to shift the composition of employment towards good jobs. As a result, such regulations, even though they will often increase unemployment, will increase average labour productivity and may improve welfare. The paper then briefly investigates the empirical importance of this interaction using data from the United States. The results suggest that the composition of jobs improves considerably in response to higher minimum wages and more generous unemployment benefits.

Suggested Citation

  • Acemoglu, Daron, 1997. "Good Jobs versus Bad Jobs: Theory and Some Evidence," CEPR Discussion Papers 1588, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1588
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    Cited by:

    1. Juan J. Dolado & Marcel Jansen & Juan F. Jimeno, 2005. "Dual employment protection legislation: a framework for analysis," Working Papers 0510, Banco de España.
    2. Ohkusa, Y., 2000. "An Empirical Evidence of Moral Hazard due to Unemployment Benefits," ISER Discussion Paper 0511, Institute of Social and Economic Research, Osaka University.
    3. Daron Acemoglu, 1999. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," American Economic Review, American Economic Association, vol. 89(5), pages 1259-1278, December.
    4. Juan José Dolado & Florentino Felgueroso & Juan F. Jimeno, "undated". "Explaining Youth Labor Market Problems in Spain: Crowding-Out, Institutions, or Technology Shifts?," Working Papers 2000-09, FEDEA.
    5. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
    6. 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.
    7. Dolado, Juan J. & Felgueroso, Florentino & Jimeno, Juan F., 2000. "Youth labour markets in Spain: Education, training, and crowding-out," European Economic Review, Elsevier, vol. 44(4-6), pages 943-956, May.
    8. Rafael Lalive & Josef Zweim�ller, "undated". "Benefit Entitlement and the Labor Market: Evidence from a Large-Scale Policy Change," IEW - Working Papers 105, Institute for Empirical Research in Economics - University of Zurich.
    9. Bamikole, Oluwafemi, 2013. "The Impact of Minimum Wage on Average Earnings in the Caribbean using Two-Selected Countries, Trinidad and Tobago and Jamaica (1980-2011 and 1997-2011)," MPRA Paper 57363, University Library of Munich, Germany.
    10. Julio J. Rotemberg, 1998. "Cyclical Movements in Wages and Consumption in a Bargaining Model of Unemployment," NBER Working Papers 6445, National Bureau of Economic Research, Inc.
    11. Mark B. Stewart, 2002. "The Inter-related Dynamics of Unemployment and Low Pay," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B2-4, International Conferences on Panel Data.
    12. repec:eee:labchp:v:3:y:1999:i:pb:p:2101-2163 is not listed on IDEAS
    13. Gadi Barlevy, 1999. "Credit Market Frictions and the Reallocation Process," Discussion Papers 1251, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    14. Andrea Bassanini & Danielle Venn, 2008. "The Impact of Labour Market Policies on Productivity in OECD Countries," International Productivity Monitor, Centre for the Study of Living Standards, vol. 17, pages 3-15, Fall.
    15. Trunin, Pavel (Трунин, Павел), 2015. "Analysis of the Level of Development of the Financial System in the Russian Federation [Анализ Уровня Развития Финансовой Системы В Российской Федерации]," Published Papers mn38, Russian Presidential Academy of National Economy and Public Administration.
    16. Dolado, Juan José & Felgueroso, Florentino & Jimeno, Juan F., 1999. "The causes of youth labour market problems in Spain: out , institutions, or technology shifts?," UC3M Working papers. Economics 6155, Universidad Carlos III de Madrid. Departamento de Economía.

    More about this item

    Keywords

    Job Composition; Minimum Wages; Search; Unemployment Insurance; Wage Differentials;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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