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Minimum Wages in an Equilibrium Search Model with Diminishing Returns to Labor in Production

Listed author(s):
  • Swinnerton, Kenneth A

This article analyzes a minimum wage in a market with imperfect information and job search. It establishes that employment effects of a minimum wage do not generally indicate welfare effects. It shows that researchers interested in welfare consequences should ask two questions. First, is the existing minimum wage binding? Second, do some firms that would be bound by a new minimum wage presently experience labor shortages? If the answers to these questions are no and yes, respectively, this article supports the conclusion that a higher minimum wage is welfare improving, regardless of its effect on the unemployment rate. Copyright 1996 by University of Chicago Press.

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File URL: http://dx.doi.org/10.1086/209814
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 14 (1996)
Issue (Month): 2 (April)
Pages: 340-355

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Handle: RePEc:ucp:jlabec:v:14:y:1996:i:2:p:340-55
Contact details of provider: Web page: http://www.journals.uchicago.edu/JOLE/

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  1. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  2. Lawrence F. Katz & Alan B. Krueger, 1992. "The Effect of the Minimum Wage on the Fast Food Industry," NBER Working Papers 3997, National Bureau of Economic Research, Inc.
  3. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
  4. Albrecht, James W & Axell, Bo, 1984. "An Equilibrium Model of Search Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 824-840, October.
  5. Charles Brown & Curtis Gilroy & Andrew Kohen, 1982. "The Effect of the Minimum Wage on Employment and Unemployment: A Survey," NBER Working Papers 0846, National Bureau of Economic Research, Inc.
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