IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_3576.html
   My bibliography  Save this paper

Spillover Effects of Minimum Wages: Theory and Experimental Evidence

Author

Listed:
  • Marcus Dittrich
  • Andreas Knabe
  • Kristina Leipold

Abstract

We study the spillover effects of minimum wages in a laboratory experiment. In a bilateral firm-worker bargaining setting, we find that the introduction of a minimum wage exerts upward pressure on wages even if the minimum wage is too low to be a binding restriction. Furthermore, raising the minimum wage to a binding level increases the bargained wage above the new minimum wage level. While the Nash solution cannot explain the existence of spillover effects, the Kalai-Smorodinsky solution yields results that are qualitatively more in line with our experimental findings.

Suggested Citation

  • Marcus Dittrich & Andreas Knabe & Kristina Leipold, 2011. "Spillover Effects of Minimum Wages: Theory and Experimental Evidence," CESifo Working Paper Series 3576, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3576
    as

    Download full text from publisher

    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp3576.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Lawrence Katz & Alan Krueger, 1992. "The Effect of the Minimum Wage on the Fast Food Industry," Working Papers 678, Princeton University, Department of Economics, Industrial Relations Section..
    2. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    3. Amartya Sen, 1997. "Maximization and the Act of Choice," Econometrica, Econometric Society, vol. 65(4), pages 745-780, July.
    4. Lawrence F. Katz & Alan B. Krueger, 1992. "The Effect of the Minimum Wage on the Fast-Food Industry," ILR Review, Cornell University, ILR School, vol. 46(1), pages 6-21, October.
    5. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    6. Marcus Dittrich & Andreas Knabe, 2010. "Wage and Employment Effects of Non-Binding Minimum Wages," CESifo Working Paper Series 3149, CESifo Group Munich.
    7. Armin Falk & Ernst Fehr & Christian Zehnder, "undated". "The Behavioral Effects of Minimum Wages," IEW - Working Papers 247, Institute for Empirical Research in Economics - University of Zurich.
    8. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    9. Jordi Brandts & Gary Charness, 2004. "Do Labour Market Conditions Affect Gift Exchange? Some Experimental Evidence," Economic Journal, Royal Economic Society, vol. 114(497), pages 684-708, July.
    10. Jean Baldwin Grossman, 1983. "The Impact of the Minimum Wage on Other Wages," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 359-378.
    11. repec:fth:prinin:298 is not listed on IDEAS
    12. 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 257-273, May.
    13. David Neumark & DMark Schweitzer & DaWilliam Wascher, 2004. "Minimum Wage Effects throughout the Wage Distribution," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marcus Dittrich & Andreas Knabe & Kristina Leipold, 2014. "Gender Differences In Experimental Wage Negotiations," Economic Inquiry, Western Economic Association International, vol. 52(2), pages 862-873, April.
    2. Köhler, Katrin & Pagel, Beatrice & Rau, Holger A., 2015. "How worker participation affects reciprocity under minimum remuneration policies: Experimental evidence," Center for European, Governance and Economic Development Research Discussion Papers 267, University of Goettingen, Department of Economics.
    3. Dittrich, Marcus & Städter, Silvio, 2015. "Moral hazard and bargaining over incentive contracts," Research in Economics, Elsevier, vol. 69(1), pages 75-85.
    4. Battisti, Michele, 2017. "High wage workers and high wage peers," Labour Economics, Elsevier, vol. 46(C), pages 47-63.

    More about this item

    Keywords

    minimum wage; bargaining; Kalai-Smorodinsky solution; labor market experiments;

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3576. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe). General contact details of provider: http://edirc.repec.org/data/cesifde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.