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Employment Cycles, Low Income Work and the Dynamic Impact of Minimum Wages. A Macro Perspective

Author

Listed:
  • Peter Flaschel

    () (Univeristy of Bielefeld, Germany)

  • Alfred Greiner

    () (Univeristy of Bielefeld, Germany)

  • Camille Logeay

    () (Macroeconomic Policy Institute (IMK) at the Hans Boeckler Foundation)

  • Christian Proano

    () (Macroeconomic Policy Institute (IMK) at the Hans Boeckler Foundation)

Abstract

In this paper we investigate the macroeconomic consequences of the introduction of an unemployment benefit system and a minimum wage barrier for both skilled and unskilled workers against the background of Goodwin's (1967) model. In the analyzed framework, characterized by free "hiring" and "firing" in the first labor markets, we can show a) that large fluctuations in employment are made (at least partially) socially acceptable through the workfare nature of the unemployment benefit system and b) that minimum real wages provide additional stability to the system dynamics by decreasing the amplitude of the fluctuations in employment and income distribution (and the related degradation of the workforce skills and family structures they are otherwise subject to).

Suggested Citation

  • Peter Flaschel & Alfred Greiner & Camille Logeay & Christian Proano, 2010. "Employment Cycles, Low Income Work and the Dynamic Impact of Minimum Wages. A Macro Perspective," IMK Working Paper 4-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  • Handle: RePEc:imk:wpaper:4-2010
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    File URL: http://www.boeckler.de/pdf/p_imk_wp_4_2010.pdf
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    Cited by:

    1. Peter Flaschel & Alfred Greiner, 2011. "A Future for Capitalism," Books, Edward Elgar Publishing, number 14241.
    2. Flaschel, Peter & Greiner, Alfred, 2012. "Flexicurity Capitalism: Foundations, Problems, and Perspectives," OUP Catalogue, Oxford University Press, number 9780199751587.

    More about this item

    Keywords

    Distributive cycles; minimum wages; stability; combined wages; base income; workfare;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

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