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Binding Minimum Wage As An Equilibrium Selection Device

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  • Beugnot, Julie

Abstract

This paper investigates the effects of a binding minimum wage in an economy which exhibits multiple unemployment equilibria. For this purpose, we develop a theoretical model based on the simple imperfectly competitive model of Manning [In Conference Papers, Economic Journal 100, 151–162 (1990)], in which we introduce labor heterogeneity and knowledge spillovers in the individual production technology. Then, using numerical simulations, we show that a binding minimum wage rules out the occurrence of an inefficient equilibrium. Last, we analyze the effects of a minimum wage increase on the labor market's outcomes.

Suggested Citation

  • Beugnot, Julie, 2013. "Binding Minimum Wage As An Equilibrium Selection Device," Macroeconomic Dynamics, Cambridge University Press, vol. 17(7), pages 1411-1437, October.
    • Handle: RePEc:cup:macdyn:v:17:y:2013:i:07:p:1411-1437_00
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    Cited by:

    1. Dr. Nickolaos Giovanis, 2018. "Determining Factors of Minimum Wage in the Member States of the OECD," Sumerianz Journal of Business Management and Marketing, Sumerianz Publication, vol. 1(4), pages 93-101, 12-2018.
    2. Dr. Nickolaos Giovanis, 2019. "“Determining Factors of Minimum Wage in the Member States of the OECDâ€," Sumerianz Journal of Business Management and Marketing, Sumerianz Publication, vol. 2(1), pages 6-14, 01-2019.

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