Wage and employment effects of non-binding minimum wages
Common wisdom holds that the introduction of a non-binding minimum wage is irrelevant for actual wages and employment. Empirical and experimental research, however, has shown that the introduction of a minimum wage can raise even those wages that were already above the new minimum wage. In this paper, we analyze how these findings can be explained by theoretical wage bargaining models between unions and firms. While the Nash bargaining solution is unaffected by minimum wages below initially bargained wages, we show that such minimum wages can drive up wages - and be harmful to employment - when bargaining follows the Kalai-Smorodinsky solution.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: Garystr. 21, 14195 Berlin (Dahlem)|
Phone: (030) 838 2272
Fax: (030) 838 2129
Web page: http://www.wiwiss.fu-berlin.de/en/index.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Armin Falk & Ernst Fehr & Christian Zehnder, .
"The Behavioral Effects of Minimum Wages,"
IEW - Working Papers
247, Institute for Empirical Research in Economics - University of Zurich.
- Falk, Armin & Fehr, Ernst & Zehnder, Christian, 2005. "The Behavioural Effects of Minimum Wages," CEPR Discussion Papers 5115, C.E.P.R. Discussion Papers.
- Falk, Armin & Fehr, Ernst & Zehnder, Christian, 2005. "The Behavioral Effects of Minimum Wages," IZA Discussion Papers 1625, Institute for the Study of Labor (IZA).
- Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-93.
- Dickens, Richard & Alan Manning, 2003. "The Impact of the National Minimum Wage on the Wage Distribution in a Low-Wage Sector," Royal Economic Society Annual Conference 2003 60, Royal Economic Society.
- McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
When requesting a correction, please mention this item's handle: RePEc:zbw:fubsbe:201015. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.