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Employment and Distribution Effects of the Minimum Wage

Author

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  • Fabian Slonimczyk

    () (International College of Economics and Finance, Higher School of Economics, Moscow)

  • Peter Skott

    () (University of Massachusetts Amherst)

Abstract

This paper analyzes the effects of the minimum wage on wage inequality, relative employment and over-education. Using an effciency wage model we show that over-education can be generated endogenously and that an increase in the minimum wage can raise both total and low-skill employment, and produce a fall in inequality. Evidence from the US suggests that these theoretical results are empirically relevant. The over-education rate has been increasing and our regression analysis suggests that the decrease in the minimum wage may have led to a deterioration of the employment and relative wage of low-skill workers. JEL Categories: J31, J41, J42

Suggested Citation

  • Fabian Slonimczyk & Peter Skott, 2010. "Employment and Distribution Effects of the Minimum Wage," UMASS Amherst Economics Working Papers 2010-03, University of Massachusetts Amherst, Department of Economics.
  • Handle: RePEc:ums:papers:2010-03
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    References listed on IDEAS

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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Does the minimum wage raise employment?
      by Economic Logician in Economic Logic on 2010-05-21 19:28:00
    2. Small truths about the minimum wage
      by chris dillow in Stumbling and Mumbling on 2010-11-13 18:26:47
    3. The low pay problem
      by chris dillow in Stumbling and Mumbling on 2012-10-29 19:17:05

    Citations

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    Cited by:

    1. Alessandra Scalioni Brito & Miguel Foguel & Celia Kerstenetzky, 2018. "The Contribution Of Minimum Wage Valorization Policy To The Decline In Household Income Inequality In Brazil: A Decomposition Approach," Anais do XLIV Encontro Nacional de Economia [Proceedings of the 44th Brazilian Economics Meeting] 217, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    2. Peter Skott, 2013. "Increasing Inequality and Financial Instability," Review of Radical Political Economics, Union for Radical Political Economics, vol. 45(4), pages 478-488, December.
    3. Fabián Slonimczyk, 2013. "Earnings inequality and skill mismatch in the U.S.: 1973–2002," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(2), pages 163-194, June.
    4. Peter Skott, 2011. "Heterodox macro after the crisis," UMASS Amherst Economics Working Papers 2011-23, University of Massachusetts Amherst, Department of Economics.
    5. Salverda, Wiemer & Checchi, Daniele, 2014. "Labour-Market Institutions and the Dispersion of Wage Earnings," IZA Discussion Papers 8220, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    Minimum wage; earnings inequality; monopsony; effciency wage; over-education.;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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