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Do Frictions Matter in the Labor Market? Accessions, Separations and Minimum Wage Effects

Author

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  • Dube, Arindrajit

    (University of Massachusetts Amherst)

  • Lester, T. William

    (University of North Carolina, Chapel Hill)

  • Reich, Michael

    (University of California, Berkeley)

Abstract

We measure labor market frictions using a strategy that bridges design-based and structural approaches: estimating an equilibrium search model using reduced-form minimum wage elasticities identified from border discontinuities and fitted with Bayesian and LIML methods. We begin by providing the first test of U.S. minimum wage effects on labor market flows and find negative effects on employment flows, but not levels. Separations and accessions fall among restaurants and teens, especially those with low tenure. Our estimated parameters of a search model with wage posting and heterogeneous workers and firms imply that frictions help explain minimum wage effects.

Suggested Citation

  • Dube, Arindrajit & Lester, T. William & Reich, Michael, 2011. "Do Frictions Matter in the Labor Market? Accessions, Separations and Minimum Wage Effects," IZA Discussion Papers 5811, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5811
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Aumentare i salari minimi non provoca disoccupazione. Evidenze empiriche dagli Stati Uniti
      by keynesblog in Keynes Blog on 2012-06-25 13:36:33

    Citations

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    Cited by:

    1. Jonathan Meer & Jeremy West, 2016. "Effects of the Minimum Wage on Employment Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 51(2), pages 500-522.
    2. Depew, Briggs & Sorensen, Todd A., 2011. "Elasticity of Supply to the Firm and the Business Cycle," IZA Discussion Papers 5928, Institute of Labor Economics (IZA).
    3. Depew, Briggs & Norlander, Peter & Sorensen, Todd A., 2013. "Flight of the H-1B: Inter-Firm Mobility and Return Migration Patterns for Skilled Guest Workers," IZA Discussion Papers 7456, Institute of Labor Economics (IZA).
    4. Phan Kim Dung, 2017. "The effects of minimum wage hikes on employment and wages in Vietnam’s micro, small, and medium enterprises," WIDER Working Paper Series 095, World Institute for Development Economic Research (UNU-WIDER).
    5. Onaran, Özlem & Stockhammer, Engelbert, 2016. "Progressive policies for wage-led growth in Europe," Greenwich Papers in Political Economy 15527, University of Greenwich, Greenwich Political Economy Research Centre.
    6. Till van Treeck, 2012. "Did inequality cause the U.S. financial crisis?," IMK Working Paper 91-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    7. Isaac Sorkin, 2015. "Are There Long-Run Effects of the Minimum Wage?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 306-333, April.
    8. Bachmann, Ronald & Penninger, Marion & Schaffner, Sandra, 2015. "The effect of minimum wages on labour market flows: Evidence from Germany," Ruhr Economic Papers 598, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    9. Ronald Bachmann & Hanna Frings, 2017. "Monopsonistic competition, low-wage labour markets, and minimum wages – An empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 49(51), pages 5268-5286, November.
    10. Pusateri, Nic, 2023. "Human capital heterogeneity of the unemployed and jobless recoveries," Journal of Macroeconomics, Elsevier, vol. 76(C).
    11. Phan Kim Dung, 2017. "The effects of minimum wage hikes on employment and wages in Vietmam's micro, small, and medium enterprises," WIDER Working Paper Series wp-2017-95, World Institute for Development Economic Research (UNU-WIDER).
    12. repec:zbw:rwirep:0358 is not listed on IDEAS
    13. Fahn, Matthias, 2011. "Three Essays on Commitment and Information Problems," Munich Dissertations in Economics 13750, University of Munich, Department of Economics.
    14. Shanshan Liu & Thomas J. Hyclak & Krishna Regmi, 2016. "Impact of the Minimum Wage on Youth Labor Markets," LABOUR, CEIS, vol. 30(1), pages 18-37, March.
    15. Peter J. Kuhn & Lizi Yu, 2019. "How Costly is Turnover? Evidence from Retail," NBER Working Papers 26179, National Bureau of Economic Research, Inc.
    16. Bosch, Gerhard & Weinkopf, Claudia, 2014. "Zur Einführung des gesetzlichen Mindestlohns von 8,50 € in Deutschland," Arbeitspapiere 304, Hans-Böckler-Stiftung, Düsseldorf.
    17. Bachmann, Ronald & König, Marion & Schaffner, Sandra, 2012. "Lost in Transition? Minimum Wage Effects on German Construction Workers," IZA Discussion Papers 6760, Institute of Labor Economics (IZA).
    18. Dale Belman & Paul Wolfson & Kritkorn Nawakitphaitoon, 2015. "Who Is Affected by the Minimum Wage?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 54(4), pages 582-621, October.
    19. E. Mark Curtis, 2014. "Who Loses Under Power Plant Cap-and-Trade Programs?," NBER Working Papers 20808, National Bureau of Economic Research, Inc.
    20. van Treeck, Till. & Sturn, Simon., 2012. "Income inequality as a cause of the Great Recession? : A survey of current debates," ILO Working Papers 994709343402676, International Labour Organization.
    21. Ronald Bachmann & Marion König & Sandra Schaffner, 2012. "Lost in Transition? – Minimum Wage Effects on German Construction Workers," Ruhr Economic Papers 0358, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    22. Onaran, Özlem, 2015. "State and the economy: a strategy for wage-led development," Greenwich Papers in Political Economy 14075, University of Greenwich, Greenwich Political Economy Research Centre.

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    More about this item

    Keywords

    minimum wage; labor market flows; monopsony; Bayesian estimation;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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