Good Jobs versus Bad Jobs: Theory and Some Evidence

Daron Acemoglu

No 1588, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper offers a model of the interaction between composition of jobs and labour market regulation. Ex-post rent-sharing due to search frictions implies that ‘good’ jobs which have higher creation costs must pay higher wages. This wage differential distorts the composition of jobs, and in the unregulated equilibrium there are too many bad jobs relative to the number of good jobs. Minimum wages and unemployment insurance encourage workers to wait for higher wages, and therefore induce firms to shift the composition of employment towards good jobs. As a result, such regulations, even though they will often increase unemployment, will increase average labour productivity and may improve welfare. The paper then briefly investigates the empirical importance of this interaction using data from the United States. The results suggest that the composition of jobs improves considerably in response to higher minimum wages and more generous unemployment benefits.

Keywords: Job Composition; Minimum Wages; Search; Unemployment Insurance; Wage Differentials (search for similar items in EconPapers)
JEL-codes: D83 J24 J31 (search for similar items in EconPapers)
Date: 1997-03
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Citations: View citations in EconPapers (16)

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Working Paper: Good Jobs Versus Bad Jobs: Theory and Some Evidence (1996)
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