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Job protection renders minimum wages less harmful

  • Schöb, Ronnie
  • Thum, Marcel

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.

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Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2011/14.

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Date of creation: 2011
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Handle: RePEc:zbw:fubsbe:201114
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  1. Caliendo, Marco & Fossen, Frank M. & Kritikos, Alexander S., 2011. "Personality Characteristics and the Decision to Become and Stay Self-Employed," IZA Discussion Papers 5566, Institute for the Study of Labor (IZA).
  2. Addison, John T. & Teixeira, Paulino, 2001. "The Economics of Employment Protection," IZA Discussion Papers 381, Institute for the Study of Labor (IZA).
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