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

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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. Download Info

Keywords: Minimum wage; On-the-job search; Search intensity; Unqualified employment (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (11)

Published in Economic Modelling, 2012, 29, pp.691-699. ⟨10.1016/j.econmod.2012.01.005⟩

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Journal Article: Minimum wage, on-the-job search and employment: On the sectoral and aggregate equilibrium effect of the mandatory minimum wage (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00742749

DOI: 10.1016/j.econmod.2012.01.005

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