Minimum wage, on-the-job search and employment: On the sectoral and aggregate equilibrium effect of the mandatory minimum wage

Frédéric Gavrel, Isabelle Lebon and Therese Rebiere

Economic Modelling, 2012, vol. 29, issue 3, 691-699

Abstract: We study the impact of a minimum wage in a segmented labor market in which workers are at different stages of their careers. At the end of a learning-by-doing period, workers paid the minimum wage quit “bad jobs” for better-paying “good jobs”, following an on-the-job search process with endogenous search intensity. A rise in the minimum wage reduces “bad jobs” creation and prompts workers to keep their “bad jobs” by reducing on-the-job search intensity. The ambiguous impact on unqualified employment replicates and explains the findings of several empirical studies. However, a minimum wage rise reduces overall employment and output.

Keywords: Minimum wage; On-the-job search; Search intensity; Unqualified employment (search for similar items in EconPapers)
JEL-codes: J38 J42 J64 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:3:p:691-699

DOI: 10.1016/j.econmod.2012.01.005

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