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Good Jobs versus Bad Jobs: Theory and Some Evidence


  • Acemoglu, Daron


This paper offers a model of the interaction between composition of jobs and labour market regulation. Ex-post rent-sharing due to search frictions implies that ‘good’ jobs which have higher creation costs must pay higher wages. This wage differential distorts the composition of jobs, and in the unregulated equilibrium there are too many bad jobs relative to the number of good jobs. Minimum wages and unemployment insurance encourage workers to wait for higher wages, and therefore induce firms to shift the composition of employment towards good jobs. As a result, such regulations, even though they will often increase unemployment, will increase average labour productivity and may improve welfare. The paper then briefly investigates the empirical importance of this interaction using data from the United States. The results suggest that the composition of jobs improves considerably in response to higher minimum wages and more generous unemployment benefits.

Suggested Citation

  • Acemoglu, Daron, 1997. "Good Jobs versus Bad Jobs: Theory and Some Evidence," CEPR Discussion Papers 1588, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1588

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    References listed on IDEAS

    1. Ajit Singh, 1998. "Savings, investment and the corporation in the East Asian miracle," Journal of Development Studies, Taylor & Francis Journals, vol. 34(6), pages 112-137.
    2. John Page, 1994. "The East Asian Miracle: Four Lessons for Development Policy," NBER Chapters,in: NBER Macroeconomics Annual 1994, Volume 9, pages 219-282 National Bureau of Economic Research, Inc.
    3. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
    4. Alwyn Young, 1992. "A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore," NBER Chapters,in: NBER Macroeconomics Annual 1992, Volume 7, pages 13-64 National Bureau of Economic Research, Inc.
    5. Kim Jong-Il & Lau Lawrence J., 1994. "The Sources of Economic Growth of the East Asian Newly Industrialized Countries," Journal of the Japanese and International Economies, Elsevier, vol. 8(3), pages 235-271, September.
    6. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1203-1250.
    7. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
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    Cited by:

    1. Juan J. Dolado & Marcel Jansen & Juan F. Jimeno, 2005. "Dual employment protection legislation: a framework for analysis," Working Papers 0510, Banco de España;Working Papers Homepage.
    2. Daron Acemoglu, 1999. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," American Economic Review, American Economic Association, vol. 89(5), pages 1259-1278, December.
    3. Juan José Dolado & Florentino Felgueroso & Juan F. Jimeno, "undated". "Explaining Youth Labor Market Problems in Spain: Crowding-Out, Institutions, or Technology Shifts?," Working Papers 2000-09, FEDEA.
    4. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
    5. Gerard J. van den Berg, 2003. "Multiple Equilibria and Minimum Wages in Labor Markets with Informational Frictions and Heterogeneous Production Technologies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1337-1357, November.
    6. Dolado, Juan J. & Felgueroso, Florentino & Jimeno, Juan F., 2000. "Youth labour markets in Spain: Education, training, and crowding-out," European Economic Review, Elsevier, vol. 44(4-6), pages 943-956, May.
    7. Julio J. Rotemberg, 1998. "Cyclical Movements in Wages and Consumption in a Bargaining Model of Unemployment," NBER Working Papers 6445, National Bureau of Economic Research, Inc.
    8. Mark B. Stewart, 2002. "The Inter-related Dynamics of Unemployment and Low Pay," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B2-4, International Conferences on Panel Data.
    9. repec:eee:labchp:v:3:y:1999:i:pb:p:2101-2163 is not listed on IDEAS
    10. Gadi Barlevy, 1999. "Credit Market Frictions and the Reallocation Process," Discussion Papers 1251, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    11. Andrea Bassanini & Danielle Venn, 2008. "The Impact of Labour Market Policies on Productivity in OECD Countries," International Productivity Monitor, Centre for the Study of Living Standards, vol. 17, pages 3-15, Fall.
    12. Dolado, Juan José & Felgueroso, Florentino & Jimeno, Juan F., 1999. "The causes of youth labour market problems in Spain: out , institutions, or technology shifts?," UC3M Working papers. Economics 6155, Universidad Carlos III de Madrid. Departamento de Economía.

    More about this item


    Job Composition; Minimum Wages; Search; Unemployment Insurance; Wage Differentials;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials


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