Sofía Bauducco
Abstract: 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.