Participation, Recruitment Selection, and the Minimum Wage

Frédéric Gavrel

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Abstract: In this paper, we re‐examine the efficiency of participation with heterogeneous workers in a search‐matching model with bargained wages and free entry. Assuming that firms hire their best applicants, we show that participation is always too low. The reason for this is a hold‐up phenomenon: to be active, a worker must pay the entire search cost whereas part of the gain from this investment goes to the firm. As a consequence, introducing a (small) minimum wage raises participation, job creation, and employment. Therefore, net aggregate income of the economy is increased.

Keywords: efficiency; Search and matching; heterogeneous workers; applicant ranking; public policies (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-dge
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01242505
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Citations: View citations in EconPapers (3)

Published in Scandinavian Journal of Economics, 2015, 117 (4), pp.1281-1305. ⟨10.1111/sjoe.12106⟩

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Related works:
Journal Article: Participation, Recruitment Selection, and the Minimum Wage (2015)
Working Paper: Participation, Recruitment Selection, and the Minimum Wage (2014)
Working Paper: Participation, Recruitment Selection, and the Minimum Wage (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01242505

DOI: 10.1111/sjoe.12106

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