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The Macroeconomic Effects of the Wage Gap between Regular and Non-Regular Employment and Minimum Wages

  • Hiroaki Sasaki
  • Jun Matsuyama
  • Kazumitsu Sako

We analyze the effect of the wage gap between regular and non-regular employment on a macroeconomy by using a Keynesian dynamic model. If the steady state equilibrium exhibits the stagnationist regime, the size of the reserve army effect affects the stability of the equilibrium. On the other hand, if the steady state equilibrium exhibits the exhilarationist regime, an increase in the wage gap destabilizes the equilibrium. The introduction of the minimum wage is desirable in that it mitigates fluctuations of business cycles. However, the introduction of an inappropriate minimum wage policy leads to the real wage and employment rate that are lower than the steady state values.

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Paper provided by Graduate School of Economics Project Center, Kyoto University in its series Discussion papers with number e-12-003.

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Length: 24 pages
Date of creation: May 2012
Date of revision:
Handle: RePEc:kue:dpaper:e-12-003
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  1. Peter Flaschel & Alfred Greiner & Camille Logeay & Christian Proano, 2012. "Employment cycles, low income work and the dynamic impact of wage regulations. A macro perspective," Journal of Evolutionary Economics, Springer, vol. 22(2), pages 235-250, April.
  2. Flaschel, Peter & Greiner, Alfred, 2009. "Employment cycles and minimum wages. A macro view," Structural Change and Economic Dynamics, Elsevier, vol. 20(4), pages 279-287, December.
  3. Marc Lavoie, 2009. "Cadrisme within a Post-Keynesian Model of Growth and Distribution," Review of Political Economy, Taylor & Francis Journals, vol. 21(3), pages 369-391.
  4. Sasaki, Hiroaki, 2012. "Is the long-run equilibrium wage-led or profit-led? A Kaleckian approach," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 231-244.
  5. Hiroaki Sasaki, 2013. "Cyclical growth in a Goodwin–Kalecki–Marx model," Journal of Economics, Springer, vol. 108(2), pages 145-171, March.
  6. Hiroaki Sasaki, 2011. "Conflict, growth, distribution, and employment: a long-run Kaleckian model," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(5), pages 539-557, September.
  7. Daniele Tavani & Peter Flaschel & Lance Taylor, 2011. "Estimated non-linearities and multiple equilibria in a model of distributive-demand cycles," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(5), pages 519-538, October.
  8. Srinivas Raghavendra, 2006. "Limits to Investment Exhilarationism," Journal of Economics, Springer, vol. 87(3), pages 257-280, 04.
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