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Employment and Distribution Effects of the Minimum Wage

  • Fabian Slonimczyk

    ()

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

  • Peter Skott

    ()

    (University of Massachusetts Amherst)

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

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Paper provided by University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2010-03.

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Date of creation: Apr 2010
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Handle: RePEc:ums:papers:2010-03
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  12. Peter Skott, 2005. "Wage inequality and overeducation in a model with efficiency wages," UMASS Amherst Economics Working Papers 2005-06, University of Massachusetts Amherst, Department of Economics.
  13. Skott, Peter, 2005. "Fairness as a source of hysteresis in employment and relative wages," Journal of Economic Behavior & Organization, Elsevier, vol. 57(3), pages 305-331, July.
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  23. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
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