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Participation, Recruitment Selection, and the Minimum Wage

  • Frederic Gavrel

This paper reexamines the e ciency of participation with heterogeneous workers in a search-matching model with bargained wages and free entry. As- suming that rms hire their best applicants, we state that participation is insu cient 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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File URL: http://tepp.eu/RePEc/files/teppwp/TEPP-wp-14-02-fg.pdf
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Paper provided by TEPP in its series TEPP Working Paper with number 2014-02.

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Date of creation: 2014
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Handle: RePEc:tep:teppwp:wp14-02
Contact details of provider: Postal: Université Paris-Est Marne La Vallée, 5 bd Descartes, 77454 Champs sur Marne
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  1. Espen R. Moen & Asa Rosén, 2004. "Does Poaching Distort Training?," Review of Economic Studies, Wiley Blackwell, vol. 71(4), pages 1143-1162, October.
  2. Gavrel, Frédéric & Lebon, Isabelle & Rebière, Thérèse, 2012. "Minimum wage, on-the-job search and employment: On the sectoral and aggregate equilibrium effect of the mandatory minimum wage," Economic Modelling, Elsevier, vol. 29(3), pages 691-699.
  3. Lehmann, Etienne & Parmentier, Alexis & Van Der Linden, Bruno, 2011. "Optimal income taxation with endogenous participation and search unemployment," Journal of Public Economics, Elsevier, vol. 95(11), pages 1523-1537.
  4. Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers 2409, C.E.P.R. Discussion Papers.
  5. Blanchard, Olivier Jean & Diamond, Peter A, 1994. "Ranking, Unemployment Duration, and Wages," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 417-34, July.
  6. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," CEPR Discussion Papers 380, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  7. 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.
  8. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  9. 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.
  10. Gavrel, Frédéric, 2012. "On the inefficiency of matching models of unemployment with heterogeneous workers and jobs when firms rank their applicants," European Economic Review, Elsevier, vol. 56(8), pages 1746-1758.
  11. James Albrecht & Lucas Navarro & Susan Vroman, 2009. "Efficiency in a Search and Matching Model with Endogenous Participation," ILADES-Georgetown University Working Papers inv218, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  12. 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.
  13. Zenou, Yves, 2009. "Search in cities," European Economic Review, Elsevier, vol. 53(6), pages 607-624, August.
  14. 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.
  15. Gavrel, Frédéric, 2011. "On the efficiency of participation with vertically differentiated workers," Economics Letters, Elsevier, vol. 112(1), pages 100-102, July.
  16. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  17. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  18. 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.
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