The Minimum Wage Spike in the Search Economy with Wage-Posting

Natalya Shelkova ()

No 2009-40, Working papers from University of Connecticut, Department of Economics

Abstract: Empirical wage and wage offer distributions exhibit substantial clustering in economies with a mandated minimum wage, the phenomenon knows as the minimum wage spike, as well as wage dispersion. Existing search-theoretic literature does not replicate both of the empirical phenomena simultaneously. This paper attempts to reconcile the two under assumptions of wage-posting, urn-ball matching and firm productive heterogeneity. A non-degenerate minimum wage spike and wage dispersion are obtained when firm wage determination embodies both incentives for collusion at the minimum wage and competition at the same time, making the spike and the dispersion the outcomes of partially collusive equilibrium. Besides this main result, the paper also shows that a higher minimum wage may reduce unemployment.

Keywords: wage-posting; minimum wage; minimum wage spike; wage dispersion; unemployment (search for similar items in EconPapers)
JEL-codes: J30 J64 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2009-12
New Economics Papers: this item is included in nep-dge and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://media.economics.uconn.edu/working/2009-40.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2009-40

Access Statistics for this paper

More papers in Working papers from University of Connecticut, Department of Economics University of Connecticut 365 Fairfield Way, Unit 1063 Storrs, CT 06269-1063. Contact information at EDIRC.
Bibliographic data for series maintained by Mark McConnel ().