Can a non-binding minimum wage reduce wages and employment?
Alexandre Janiak; Sofía Bauducco
Macroeconomic Dynamics, publicada online en abril 2016
We show that, in the large-firm search model, employment may decrease even when the level of the introduced minimum wage lies below the equilibrium wage of the laissez-faire economy. Wages also decrease in the presence of the minimum wage. The argument is based on multiple equilibria and the idea that, in a large-firm context, the representative firm may choose to overemploy workers in order to renegotiate lower wages.
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