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Employment Effects of Minimum Wages in Inflexible Labor Markets

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  • Ozturk, Orgul

Abstract

This paper structurally models and estimates the employment effects of minimum wages in inflexible labor markets 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 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 and has important employment effects. I estimate the model using survey data from Turkey. I find 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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Bibliographic 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: 2008
Handle: RePEc:pra:mprapa:8016

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  1. 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.
  2. 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.
  3. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  4. 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.
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Cited by:
  1. Papps, Kerry L., 2011. "The Effects of Social Security Taxes and Minimum Wages on Employment: Evidence from Turkey," IZA Discussion Papers 6214, Institute for the Study of Labor (IZA).

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