Minimum Wage Spillover Effects and Social Welfare in a Model of Stochastic Job Matching

Panagiotis Nanos

No 2023004, Working Papers from The University of Sheffield, Department of Economics

Abstract: In this paper, I carry out a welfare analysis of the minimum wage in the framework of a Diamond-Mortensen-Pissarides model with stochastic job matching. I explore the role of the minimum wage in a labour market with trading externalities and present the necessary and sufficient condition for a minimum wage hike to be efficiency-enhancing. In this context, I characterise minimum wage spillover effects and demonstrate that there is a direct link between the welfare effects and spillover effects of a minimum wage. This theoretical finding suggests that the welfare impact of minimum wage changes can be inferred from the empirical observation of spillover effects on the wage distribution.

Keywords: minimum wage; wage distribution; social welfare; policy evaluation (search for similar items in EconPapers)
JEL-codes: H21 H23 J08 J64 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2023-01
New Economics Papers: this item is included in nep-dge, nep-lab and nep-pbe
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https://www.sheffield.ac.uk/economics/research/serps First version, January 2023 (application/pdf)

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Journal Article: Minimum wage spillover effects and social welfare in a model of stochastic job matching (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2023004

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