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Do Frictions Matter in the Labor Market? Accessions, Separations and Minimum Wage Effects

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Author Info

  • Dube, Arindrajit

    () (University of Massachusetts Amherst)

  • Lester, T. William

    () (University of North Carolina, Chapel Hill)

  • Reich, Michael

    () (University of California, Berkeley)

Abstract

We measure labor market frictions using a strategy that bridges design-based and structural approaches: estimating an equilibrium search model using reduced-form minimum wage elasticities identified from border discontinuities and fitted with Bayesian and LIML methods. We begin by providing the first test of U.S. minimum wage effects on labor market flows and find negative effects on employment flows, but not levels. Separations and accessions fall among restaurants and teens, especially those with low tenure. Our estimated parameters of a search model with wage posting and heterogeneous workers and firms imply that frictions help explain minimum wage effects.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5811.

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Length: 41 pages
Date of creation: Jun 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5811

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Related research

Keywords: minimum wage; labor market flows; monopsony; Bayesian estimation;

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References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Aumentare i salari minimi non provoca disoccupazione. Evidenze empiriche dagli Stati Uniti
    by keynesblog in Keynes Blog on 2012-06-25 08:36:33
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Cited by:
  1. Depew, Briggs & Sorensen, Todd, 2011. "Elasticity of Supply to the Firm and the Business Cycle," IZA Discussion Papers 5928, Institute for the Study of Labor (IZA).
  2. Bachmann, Ronald & König, Marion & Schaffner, Sandra, 2012. "Lost in Transition? Minimum Wage Effects on German Construction Workers," IZA Discussion Papers 6760, Institute for the Study of Labor (IZA).
  3. Till van Treeck, 2012. "Did inequality cause the U.S. financial crisis?," IMK Working Paper 91-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  4. Fahn, Matthias, 2011. "Three Essays on Commitment and Information Problems," Munich Dissertations in Economics 13750, University of Munich, Department of Economics.

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