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Job protection renders minimum wages less harmful

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  • Schöb, Ronnie
  • Thum, Marcel

Abstract

Individual labour productivities are often unobservable for firms when hiring new workers. Job protection may prevent firms ex post from using information about labour productivities. We show that a binding minimum wage introduced in the presence of job protection will lead to lower unemployment levels than predicted by the standard labour market model with heterogeneous labour and full information.

Suggested Citation

  • Schöb, Ronnie & Thum, Marcel, 2011. "Job protection renders minimum wages less harmful," Discussion Papers 2011/14, Free University Berlin, School of Business & Economics.
    • Handle: RePEc:zbw:fubsbe:201114
    as

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    References listed on IDEAS

    as
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    7. Adriana D. Kugler & Gilles Saint-Paul, 2004. "How Do Firing Costs Affect Worker Flows in a World with Adverse Selection?," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 553-584, July.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Minimum wages; unemployment; hidden information; labour market regulation;
    All these keywords.

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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