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Employment cycles and minimum wages. A macro view

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  • Flaschel, Peter
  • Greiner, Alfred

Abstract

We start from the hypothesis that Goodwin's (1967) distributive cycle does not represent a process of social reproduction that can be considered as adequate and sustainable in the long-run, due to the degradation of a part of the workforce it implies during periods of mass unemployment. Against this background, the paper then formulates an unemployment benefit system and a minimum (and maximum) wage rule for the employed where this form of economic reproduction of capitalism is overcome, at least to a certain extent. There is perfect mobility on the labor market (concerning 'hiring' and 'firing'), with fluctuations of the employment rate made socially acceptable by guaranteeing minimum levels of income to all members of the workforce. We can show in this framework that minimum (and maximum) real wages provide increased stability to the economy by reducing the amount of overshooting in income distribution as well as the employment rate.

Suggested Citation

  • Flaschel, Peter & Greiner, Alfred, 2009. "Employment cycles and minimum wages. A macro view," Structural Change and Economic Dynamics, Elsevier, vol. 20(4), pages 279-287, December.
    • Handle: RePEc:eee:streco:v:20:y:2009:i:4:p:279-287
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    References listed on IDEAS

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    1. Nelson H. Barbosa‐Filho & Lance Taylor, 2006. "Distributive And Demand Cycles In The Us Economy—A Structuralist Goodwin Model," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 389-411, July.
    2. Groth, Christian & Madsen, Jakob B., 2016. "Medium-term fluctuations and the “Great Ratios” of economic growth," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 149-176.
    3. Lawrence F. Katz & Olivier Blanchard, 1999. "Wage Dynamics: Reconciling Theory and Evidence," American Economic Review, American Economic Association, vol. 89(2), pages 69-74, May.
    4. Worgotter Andreas, 1986. "Klassenkampf im Goodwin-Konjunkturmodell: Wer gegen wen?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 201(3), pages 222-228, March.
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    Cited by:

    1. Charpe, Matthieu & Flaschel, Peter & Hartmann, Florian & Malikane, Christopher, 2014. "Segmented Labor Markets and the Distributive Cycle: A Roadmap towards Inclusive Growth," MPRA Paper 62832, University Library of Munich, Germany.
    2. Alunica Morariu, 2019. "Migration and Asylum Policy Within EU. Causes, Needs, Strategic Policy and Evolutions," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 148-157, December.
    3. Asada, Toichiro & Flaschel, Peter & Greiner, Alfred & Proaño, Christian R., 2011. "Sustainable capitalism: Full-employment flexicurity growth with real wage rigidities," Journal of Economic Behavior & Organization, Elsevier, vol. 77(3), pages 248-264, March.
    4. Flaschel, Peter & Greiner, Alfred, 2012. "Flexicurity Capitalism: Foundations, Problems, and Perspectives," OUP Catalogue, Oxford University Press, number 9780199751587.
    5. 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.
    6. Sasaki, Hiroaki & Matsuyama, Jun & Sako, Kazumitsu, 2013. "The macroeconomic effects of the wage gap between regular and non-regular employment and of minimum wages," Structural Change and Economic Dynamics, Elsevier, vol. 26(C), pages 61-72.
    7. Peter Flaschel & Alfred Greiner & Camille Logeay & Christian Proano, 2012. "Employment cycles, low income work and the dynamic impact of wage regulations. A macro perspective," Journal of Evolutionary Economics, Springer, vol. 22(2), pages 235-250, April.
    8. Sasaki, Hiroaki & Asada, Yasukuni & Sonoda, Ryunosuke, 2024. "Effects of Minimum Wage Share and Wage Gap Reduction on Cyclical Fluctuation: A Goodwin Approach," MPRA Paper 121695, University Library of Munich, Germany.
    9. 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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