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Minimum wages, wage dispersion and unemployment : a review on new search models

Author

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  • Garloff, Alfred

    () (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])

Abstract

"This paper analyses theoretical effects of minimum wages on employment and the wage distribution under a frictional setting. I review new developments in search theory and discuss the influence of minimum wages on wages and employment under each setting. Thereby, a major theoretical focus of the paper is the integration of heterogeneity on both sides of the market in equilibrium search models. In the homogeneous case minimum wages do not affect employment, while in the heterogenous case theoretical results are mixed. There is no unique connection between unemployment and minimum wages, and the effect can be positive, zero or negative. However, the most advanced models, integrating heterogeneity on both sides of the market, seem to support the hypothesis that an increase in the minimum wage generally leads to an increase in unemployment as well." (Author's abstract, IAB-Doku) ((en))

Suggested Citation

  • Garloff, Alfred, 2008. "Minimum wages, wage dispersion and unemployment : a review on new search models," IAB Discussion Paper 200833, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  • Handle: RePEc:iab:iabdpa:200833
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    File URL: http://doku.iab.de/discussionpapers/2008/dp3308.pdf
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    References listed on IDEAS

    as
    1. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "The Distribution of Earnings in an Equilibrium Search Model with State-Dependent Offers and Counteroffers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 989-1016, November.
    2. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, January.
    3. Holzner, Christian & Launov, Andrey, 2005. "Search Equilibrium, Production Parameters and Social Returns to Education: Theory and Estimation," IZA Discussion Papers 1904, Institute for the Study of Labor (IZA).
    4. Jolivet, Gregory & Postel-Vinay, Fabien & Robin, Jean-Marc, 2006. "The empirical content of the job search model: Labor mobility and wage distributions in Europe and the US," European Economic Review, Elsevier, vol. 50(4), pages 877-907, May.
    5. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
    6. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
    7. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, January.
    8. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    9. Koning, Pierre & Ridder, Geert & van den Berg, Gerard J, 1995. "Structural and Frictional Unemployment in an Equilibrium Search Model with Heterogeneous Agents," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(S), pages 133-151, Suppl. De.
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    More about this item

    Keywords

    Lohnpolitik; Mindestlohn; Beschäftigungseffekte; Einkommenseffekte; Lohndifferenzierung; Arbeitslosigkeit; Arbeitsplatzabbau; Lohntheorie; labour turnover; friktionelle Arbeitslosigkeit; Sucharbeitslosigkeit; Lohnstruktur; Arbeitsplatzsuchtheorie;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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