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Participation, Recruitment Selection, and the Minimum Wage

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  • Frederic Gavrel

Abstract

This paper reexamines the efficiency of participation with heterogeneous workers in a search-matching model with bargained wages and free entry. Assuming that firms hire their best applicants, we state that participation is insufficient whatever workers' bargaining strengths. The reason for this is that, when holding a job, the marginal participant should receive the entire output. As a consequence, introducing a (small) minimum wage raises participation, job creation, and employment. Therefore the aggregate income of the economy is enhanced.

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Paper provided by TEPP in its series TEPP Working Paper with number 2014-02.

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Date of creation: 2014
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Handle: RePEc:tep:teppwp:wp14-02

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Postal: Université Paris-Est Marne La Vallée, 5 bd Descartes, 77454 Champs sur Marne
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  1. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  2. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," CEPR Discussion Papers 380, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  3. Gavrel, Frédéric, 2009. "Technical skill bias as a response of firms to unemployment: A matching model with applicant ranking and endogenous skill requirements," Labour Economics, Elsevier, vol. 16(3), pages 304-310, June.
  4. Olivier Jean Blanchard & Peter Diamond, 1990. "Ranking, Unemployment Duration, and Wages," NBER Working Papers 3387, National Bureau of Economic Research, Inc.
  5. Etienne LEHMANN & Alexis PARMENTIER & Bruno VAN DER LINDEN, 2009. "Optimal Income Taxation with Endogenous Participation and Search Unemployment," Working Papers 2009-01, Centre de Recherche en Economie et Statistique.
  6. Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers 2409, C.E.P.R. Discussion Papers.
  7. Albrecht, James & Navarro, Lucas & Vroman, Susan, 2010. "Efficiency in a search and matching model with endogenous participation," Economics Letters, Elsevier, vol. 106(1), pages 48-50, January.
  8. Zenou, Yves, 2009. "Search in cities," European Economic Review, Elsevier, vol. 53(6), pages 607-624, August.
  9. Christopher J. Flinn, 2006. "Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates," Econometrica, Econometric Society, vol. 74(4), pages 1013-1062, 07.
  10. Moen, Espen R. & Rosén, Åsa, 2002. "Does poaching distort training?," Working Paper Series 4/2002, Swedish Institute for Social Research.
  11. Gavrel, Frédéric & Lebon, Isabelle & Rebière, Thérèse, 2012. "Minimum wage, on-the-job search and employment: On the sectoral and aggregate equilibrium effect of the mandatory minimum wage," Economic Modelling, Elsevier, vol. 29(3), pages 691-699.
  12. Espen R. Moen & �sa Rosén, 2004. "Does Poaching Distort Training?," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1143-1162.
  13. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  14. Gavrel, Frédéric, 2011. "On the efficiency of participation with vertically differentiated workers," Economics Letters, Elsevier, vol. 112(1), pages 100-102, July.
  15. David Card & Alan B. Krueger, 1993. "Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania," NBER Working Papers 4509, National Bureau of Economic Research, Inc.
  16. Gavrel, Frédéric, 2012. "On the inefficiency of matching models of unemployment with heterogeneous workers and jobs when firms rank their applicants," European Economic Review, Elsevier, vol. 56(8), pages 1746-1758.
  17. Moen, Espen R, 1999. "Education, Ranking, and Competition for Jobs," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 694-723, October.
  18. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  19. Portugal, Pedro & Cardoso, Ana Rute, 2002. "Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations," IZA Discussion Papers 544, Institute for the Study of Labor (IZA).
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