IDEAS home Printed from https://ideas.repec.org/p/edj/ceauch/308.html

Can a non-binding minimum wage reduce wages and employment?

Author

Listed:
  • Sofía Bauducco
  • Alexandre Janiak

Abstract

We show that, in the large-firm search model (e.g. Cahuc et al. (2008)), a minimum wage may reduce employment even when the level of the introduced minimum wage lies below the equilibrium wage of the laisser-faire economy. The argument is based on multiple equilibria and the idea that, in a large-firm context, the representative firm may choose to overemploy workers in order to renegotiate lower wages.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Sofía Bauducco & Alexandre Janiak, 2015. "Can a non-binding minimum wage reduce wages and employment?," Documentos de Trabajo 308, Centro de Economía Aplicada, Universidad de Chile.
    • Handle: RePEc:edj:ceauch:308
    as

    Download full text from publisher

    File URL: http://www.cea-uchile.cl/wp-content/uploads/2019/04/308_AJ_1042019.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dirk Krueger & Fabrizio Perri & Luigi Pistaferri & Giovanni L. Violante, 2010. "Cross Sectional Facts for Macroeconomists," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 1-14, January.
    2. Cahuc, Pierre & Wasmer, Etienne, 2001. "Does Intrafirm Bargaining Matter In The Large Firm'S Matching Model?," Macroeconomic Dynamics, Cambridge University Press, vol. 5(5), pages 742-747, November.
    3. Sofia Bauducco & Alexandre Janiak, 2015. "The Impact of the Minimum Wage on Capital Accumulation and Employment in a Large-Firm Framework," Working Papers Central Bank of Chile 755, Central Bank of Chile.
    4. Christopher A. Pissarides, 2009. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," Econometrica, Econometric Society, vol. 77(5), pages 1339-1369, September.
    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. Bauducco, Sofía & Janiak, Alexandre, 2018. "The macroeconomic consequences of raising the minimum wage: Capital accumulation, employment and the wage distribution," European Economic Review, Elsevier, vol. 101(C), pages 57-76.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Noritaka Kudoh & Hiroaki Miyamoto & Masaru Sasaki, 2019. "Employment and Hours over the Business Cycle in a Model with Search Frictions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 31, pages 436-461, January.
    2. Alexandre Janiak & Etienne Wasmer, 2014. "Employment protection and capital-labor ratios," Sciences Po Economics Publications (main) hal-01061024, HAL.
    3. Tsasa, Jean-Paul K., 2022. "Labor market volatility in a fully specified RBC search model: An analytical investigation," Journal of Mathematical Economics, Elsevier, vol. 103(C).
    4. Alexandre Janiak & Etienne Wasmer, 2012. "EPL and capital-labor ratios," Documentos de Trabajo 288, Centro de Economía Aplicada, Universidad de Chile.
    5. repec:spo:wpmain:info:hdl:2441/3aom2mve1k829p8sp4h3vrpgkg is not listed on IDEAS
    6. Adjemian, Stéphane & Karamé, Frédéric & Langot, François, 2021. "Nonlinearities and Workers’ Heterogeneity in Unemployment Dynamics," Dynare Working Papers 71, CEPREMAP.
    7. Emmanuel Saez & Pascal Michaillat, 2013. "A Theory of Aggregate Supply and Aggregate Demand as Functions of Market Tightness with Prices as Parameters," 2013 Meeting Papers 1216, Society for Economic Dynamics.
    8. Leo Kaas & Philipp Kircher, 2015. "Efficient Firm Dynamics in a Frictional Labor Market," American Economic Review, American Economic Association, vol. 105(10), pages 3030-3060, October.
    9. Alexandre Janiak & Etienne Wasmer, 2014. "Employment protection and capital-labor ratios," SciencePo Working papers hal-03460272, HAL.
    10. Janiak, Alexandre, 2013. "Structural unemployment and the costs of firm entry and exit," Labour Economics, Elsevier, vol. 23(C), pages 1-19.
    11. repec:spo:wpmain:info:hdl:2441/2ennjqtovk8lvprrqlro5ni69v is not listed on IDEAS
    12. O'Farrell, Rory, 2012. "The effect of international firm mobility on wages and unemployment," Labour Economics, Elsevier, vol. 19(6), pages 931-943.
    13. Alexandre Janiak & Etienne Wasmer, 2014. "Employment protection and capital-labor ratios," SciencePo Working papers hal-01061024, HAL.
    14. Gabriele Cardullo, 2010. "Matching Models Under Scrutiny: An Appraisal Of The Shimer Puzzle," Journal of Economic Surveys, Wiley Blackwell, vol. 24(4), pages 622-656, September.
    15. Alexandre Janiak, 2010. "Structural unemployment and the regulation of product market," Documentos de Trabajo 274, Centro de Economía Aplicada, Universidad de Chile.
    16. repec:spo:wpecon:info:hdl:2441/2ennjqtovk8lvprrqlro5ni69v is not listed on IDEAS
    17. repec:hal:journl:hal-01061024 is not listed on IDEAS
    18. Etienne Wasmer & Alexandre Janiak, 2014. "Employment protection and capital-labor ratios," Sciences Po Economics Discussion Papers 2014-11, Sciences Po Departement of Economics.
    19. Bauducco, Sofía & Janiak, Alexandre, 2018. "The macroeconomic consequences of raising the minimum wage: Capital accumulation, employment and the wage distribution," European Economic Review, Elsevier, vol. 101(C), pages 57-76.
    20. Xinhua Gu & Yang Zhang & Xiao Chang, 2017. "The role of financial systems for cross-country differences in the link between income and consumption inequality," Applied Economics, Taylor & Francis Journals, vol. 49(24), pages 2365-2378, May.
    21. Kudoh, Noritaka & Miyamoto, Hiroaki, 2025. "Robots, AI, and unemployment," Journal of Economic Dynamics and Control, Elsevier, vol. 174(C).
    22. Koenig, Felix & Manning, Alan & Petrongolo, Barbara, 2014. "Reservation wages and the wage flexibility puzzle," LSE Research Online Documents on Economics 60613, London School of Economics and Political Science, LSE Library.
    23. Toshihiko Mukoyama, 2019. "Heterogeneous Jobs and the Aggregate Labour Market," The Japanese Economic Review, Springer, vol. 70(1), pages 30-50, March.
    24. Sof'a Gallardo & Carlos Madeira, 2022. "The role of financial surveys for economic research and policy making in emerging markets," Chapters, in: Duc K. Nguyen (ed.), Handbook of Banking and Finance in Emerging Markets, chapter 36, pages 676-686, Edward Elgar Publishing.

    More about this item

    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:edj:ceauch:308. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/ceuclcl.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.