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Separation incentives and minimum wages in a job-posting search framework

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  • Amanda Gosling

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  • Mathan Satchi

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    Abstract

    We present a job posting model of a labour market where jobs differ in characteristics other than wages and workers differ in their marginal willingness to pay for such characteristics. This creates incentives for firms to separate workers by posting multiple jobs. The interaction between these separation incentives and the standard search frictions is the key contribution of the paper. The paper examines the implications for policies such as a minimum wage or ones which set minimum standards on these non-wage job characteristics. We show that policies that set standards on wages and the other job characteristics can increase the utility of the worst-off workers and may reduce inefficient forms of unemployment. Policies that only intervene in one aspect on the other hand may increase these forms of unemployment.

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    File URL: ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/ukcedp/1401.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number 1401.

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    Date of creation: Feb 2014
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    Handle: RePEc:ukc:ukcedp:1401

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    Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
    Phone: +44 (0)1227 764000
    Fax: +44 (0)1227 827850
    Web page: http://www.ukc.ac.uk/economics/

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    Related research

    Keywords: Search; Job posting; Non-wage characteristics; Separation incentives; Minimum Wages;

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    1. Green, Francis & Machin, Stephen & Manning, Alan, 1996. "The Employer Size-Wage Effect: Can Dynamic Monopsony Provide an Explanation?," Oxford Economic Papers, Oxford University Press, vol. 48(3), pages 433-55, July.
    2. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2003. "Wage bargaining with on-the-job search : theory and evidence," Research Unit Working Papers 0212, Laboratoire d'Economie Appliquee, INRA.
    3. Burdett, Ken & Coles, Melvyn, 2010. "Wage/tenure contracts with heterogeneous firms," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1408-1435, July.
    4. Postel-Vinay & Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Working Papers 155908, Institut National de la Recherche Agronomique, France.
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    7. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
    8. Gorgens, Tue, 2002. "Reservation wages and working hours for recently unemployed US women," Labour Economics, Elsevier, vol. 9(1), pages 93-123, February.
    9. Dale T. Mortensen, 1977. "Unemployment insurance and job search decisions," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
    10. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "To Match or Not To Match ? Optimal Wage Policy with Endogenous Worker search Intensity," Working Papers 2002-59, Centre de Recherche en Economie et Statistique.
    11. James J. Heckman & Christopher J. Flinn, 1982. "New Methods for Analyzing Structural Models of Labor Force Dynamics," NBER Working Papers 0856, National Bureau of Economic Research, Inc.
    12. Hwang, Hae-shin & Mortensen, Dale T & Reed, W Robert, 1998. "Hedonic Wages and Labor Market Search," Journal of Labor Economics, University of Chicago Press, vol. 16(4), pages 815-47, October.
    13. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-39, March.
    14. Carlos Carrillo-Tudela, 2009. "An Equilibrium Search Model When Firms Observe Workers' Employment Status," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 485-506, 05.
    15. Blau, David M, 1991. "Search for Nonwage Job Characteristics: A Test of the Reservation Wage Hypothesis," Journal of Labor Economics, University of Chicago Press, vol. 9(2), pages 186-205, April.
    16. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
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