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Labor Market Institutions and the Employment-Productivity Trade-Off: A Wage Posting Approach

Author

Listed:
  • Chéron, Arnaud

    (University of Le Mans)

  • Hairault, Jean-Olivier

    (University of Paris 1 Panthéon-Sorbonne)

  • Langot, François

    (University of Le Mans)

Abstract

This paper analyzes the implications of labor market institutions and policies on the employment-labor productivity trade-off. We consider an equilibrium search model with wage posting and specific human capital investment where unemployment and the distribution of both wages and productivity are endogenous. By means of simulations of this model estimated on French data, we show that the minimum wage allows a high production level to be reached by inducing increased training investment, even if its optimal level is weaker. Considering the payroll tax subsidies implemented to lower the labor cost without removing the minimum wage legislation, we show that this policy has been welfare improving, and has been relatively well managed by spreading subsidies over a large range of wages, and not only at the minimum wage level.

Suggested Citation

  • Chéron, Arnaud & Hairault, Jean-Olivier & Langot, François, 2004. "Labor Market Institutions and the Employment-Productivity Trade-Off: A Wage Posting Approach," IZA Discussion Papers 1364, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1364
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    References listed on IDEAS

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    Cited by:

    1. Batyra, Anna & Sneessens, Henri R., 2010. "Selective reductions in labor taxation: Labor market adjustments and macroeconomic performance," Journal of Policy Modeling, Elsevier, vol. 32(4), pages 531-543, July.

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    More about this item

    Keywords

    labor costs; wage posting; productivity; employment;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • 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
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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