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Employment Effects of Minimum Wages in Inflexible Labor Markets

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Author Info
Ozturk, Orgul

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Abstract

This paper structurally models and estimates the employment effects of a minimum wage regulation in an inflexible labor market with fixed employment costs. When there are fixed costs associated with employment, minimum-wage regulation not only results in a reduction in employment among low-productivity workers but also shifts the distribution of hours for the available jobs in the market, resulting in a scarcity of part-time jobs. Thus, for sufficiently high employment costs, a minimum wage makes it less likely for "marginal" workers to enter and stay in the labor market. I estimate the model using survey data from Turkey. I find a significant reduction in employment due to the loss of part-time jobs caused by the national minimum-wage policy in this highly inflexible labor market.

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File URL: http://mpra.ub.uni-muenchen.de/8016/
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File URL: http://mpra.ub.uni-muenchen.de/16233/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8016.

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Date of creation: 2006
Date of revision: Jun 2009
Handle: RePEc:pra:mprapa:8016

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Related research
Keywords: Fixed employment costs; labor market inflexibility; minimum wage; female labor force participation; part-time jobs; hours constraints;

Find related papers by JEL classification:
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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References listed on IDEAS
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.:
  1. Mincer, Jacob, 1985. "Intercountry Comparisons of Labor Force Trends and of Related Developments: An Overview," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages S1-32, January. [Downloadable!] (restricted)
  2. Dickens, Richard & Machin, Stephen & Manning, Alan, 1999. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 1-22, January. [Downloadable!] (restricted)
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  3. Moffitt, Robert, 1982. "The Tobit Model, Hours of Work and Institutional Constraints," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 510-15, August. [Downloadable!] (restricted)
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