Minimum wage spillover effects and social welfare in a model of stochastic job matching

Panagiotis Nanos

Journal of Public Economic Theory, 2023, vol. 25, issue 4, 753-802

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 labor market with trading externalities and present the necessary and sufficient condition for a minimum wage hike to be efficiency enhancing. In this context, I characterize 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.

Date: 2023
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https://doi.org/10.1111/jpet.12636

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Working Paper: 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:bla:jpbect:v:25:y:2023:i:4:p:753-802

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