Spillover Effects of Minimum Wages: Theory and Experimental Evidence

Marcus Dittrich (), Andreas Knabe and Kristina Leipold

No 3576, CESifo Working Paper Series from CESifo

Abstract: We study the spillover effects of minimum wages in a laboratory experiment. In a bilateral firm-worker bargaining setting, we find that the introduction of a minimum wage exerts upward pressure on wages even if the minimum wage is too low to be a binding restriction. Furthermore, raising the minimum wage to a binding level increases the bargained wage above the new minimum wage level. While the Nash solution cannot explain the existence of spillover effects, the Kalai-Smorodinsky solution yields results that are qualitatively more in line with our experimental findings.

Keywords: minimum wage; bargaining; Kalai-Smorodinsky solution; labor market experiments (search for similar items in EconPapers)
JEL-codes: C71 C91 J38 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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