Citation

Discussion Paper Details

Please find the details for DP3977 in an easy to copy and paste format below:

Full Details

Title: Multiple Equilibria and Minimum Wages in Labour Markets with Informational Frictions and Heterogenous Production Technologies

Author(s): Gerard van den Berg

Publication Date: July 2003

Keyword(s): congestion, equilibrium, imperfect information, job search, labour market policy, matching, productivity, unemployment and wages

Programme Area(s): Labour Economics

Abstract: It is often argued that a mandatory minimum wage is binding only if the wage density displays a spike at it. In this Paper we analyse a model with search frictions and heterogeneous production technologies, in which imposition of a minimum wage affects wages even though, after imposition, the lowest wage in the market exceeds the minimum wage. The model has multiple equilibria as a result of the fact that the reservation wage of the unemployed and the lowest production technology in use affect each other. Imposition of a minimum wage may improve social welfare.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3977

Bibliographic Reference

Berg, G. 2003. 'Multiple Equilibria and Minimum Wages in Labour Markets with Informational Frictions and Heterogenous Production Technologies'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3977