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Participation, Recruitment Selection, and the Minimum Wage

  • Frédéric Gavrel


    (TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS, CREM - Centre de Recherche en Economie et Management - CNRS - Université de Caen Basse-Normandie - UR1 - Université de Rennes 1)

This paper reexamines the efficiency of participation with heterogeneous workers in a search-matching model with bargained wages and free entry. Assuming that firms hire their best applicants, we state that participation is insufficient whatever workers' bargaining strengths. The reason for this is that, when holding a job, the marginal participant should receive the entire output. As a consequence, introducing a (small) minimum wage raises participation, job creation, and employment. Therefore the aggregate income of the economy is enhanced.

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Paper provided by HAL in its series Working Papers with number halshs-00948453.

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Date of creation: 14 Feb 2014
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Handle: RePEc:hal:wpaper:halshs-00948453
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  1. Christopher J. Flinn, 2006. "Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates," Econometrica, Econometric Society, vol. 74(4), pages 1013-1062, 07.
  2. Pedro Portugal & Ana Rute Cardoso, 2006. "Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 988-1013, 09.
  3. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  4. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  5. Albrecht, James & Navarro, Lucas & Vroman, Susan, 2010. "Efficiency in a search and matching model with endogenous participation," Economics Letters, Elsevier, vol. 106(1), pages 48-50, January.
  6. Espen R. Moen & �sa Rosén, 2004. "Does Poaching Distort Training?," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1143-1162.
  7. Frédéric Gavrel, 2011. "On the Inefficiency of Matching Models of Unemployment with Heterogeneous Workers and Jobs when Firms Rank their Applicants," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201107, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  8. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," Papers 1997-25, Uppsala - Working Paper Series.
  9. Etienne Lehmann & Alexis Parmentier & Bruno Van der Linden, 2011. "Optimal Income Taxation with Endogenous Participation and Search Unemployment," CESifo Working Paper Series 3324, CESifo Group Munich.
  10. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-93, September.
  11. Frédéric Gavrel, 2011. "On the efficiency of participation with vertically differentiated workers," Post-Print halshs-00607253, HAL.
  12. Moen, Espen R, 1999. "Education, Ranking, and Competition for Jobs," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 694-723, October.
  13. Zenou, Yves, 2009. "Search in cities," European Economic Review, Elsevier, vol. 53(6), pages 607-624, August.
  14. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  15. repec:oup:restud:v:61:y:1994:i:3:p:417-34 is not listed on IDEAS
  16. Frédéric Gavrel & Isabelle Lebon & Thérèse Rebière, 2012. "Minimum wage, on-the-job search and employment : On the sectoral and aggregate equilibrium effect of the mandatory minimum wage," Post-Print halshs-00742749, HAL.
  17. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
  18. Gavrel, Frédéric, 2009. "Technical skill bias as a response of firms to unemployment: A matching model with applicant ranking and endogenous skill requirements," Labour Economics, Elsevier, vol. 16(3), pages 304-310, June.
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