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The Macroeconomic Effects of the Wage Gap between Regular and Non-Regular Employment and Minimum Wages

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  • Hiroaki Sasaki
  • Jun Matsuyama
  • Kazumitsu Sako
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    Abstract

    We analyze the effect of the wage gap between regular and non-regular employment on a macroeconomy by using a Keynesian dynamic model. If the steady state equilibrium exhibits the stagnationist regime, the size of the reserve army effect affects the stability of the equilibrium. On the other hand, if the steady state equilibrium exhibits the exhilarationist regime, an increase in the wage gap destabilizes the equilibrium. The introduction of the minimum wage is desirable in that it mitigates fluctuations of business cycles. However, the introduction of an inappropriate minimum wage policy leads to the real wage and employment rate that are lower than the steady state values.

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    File URL: http://www.econ.kyoto-u.ac.jp/projectcenter/Paper/e-12-003.pdf
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    Bibliographic Info

    Paper provided by Graduate School of Economics Project Center, Kyoto University in its series Discussion papers with number e-12-003.

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    Length: 24 pages
    Date of creation: May 2012
    Date of revision:
    Handle: RePEc:kue:dpaper:e-12-003

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    Related research

    Keywords: wage gap; regular and non-regular employment; minimum wage; demandled growth model;

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    References

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    1. Srinivas Raghavendra, 2006. "Limits to Investment Exhilarationism," Journal of Economics, Springer, Springer, vol. 87(3), pages 257-280, 04.
    2. Marc Lavoie, 2009. "Cadrisme within a Post-Keynesian Model of Growth and Distribution," Review of Political Economy, Taylor & Francis Journals, Taylor & Francis Journals, vol. 21(3), pages 369-391.
    3. Peter Flaschel & Alfred Greiner & Camille Logeay & Christian Proano, 2012. "Employment cycles, low income work and the dynamic impact of wage regulations. A macro perspective," Journal of Evolutionary Economics, Springer, Springer, vol. 22(2), pages 235-250, April.
    4. Flaschel, Peter & Greiner, Alfred, 2009. "Employment cycles and minimum wages. A macro view," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 20(4), pages 279-287, December.
    5. Daniele Tavani & Peter Flaschel & Lance Taylor, 2011. "Estimated non-linearities and multiple equilibria in a model of distributive-demand cycles," International Review of Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 25(5), pages 519-538, October.
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