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.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
1588.
Find related papers by JEL classification: D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information 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
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2005.
"A Positive Theory Of Geographic Mobility And Social Insurance,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 263-303, 02.
[Downloadable!] (restricted)
Did you know? You can include your works in the database easily by uploading them on the Munich Personal RePEc Archive (MPRA) if you do not have access to an institutional RePEc archive.