Minimum Wages in an Equilibrium Search Model with Diminishing Returns to Labor in Production

JOURNAL OF LABOR ECONOMICS, Vol. 14, No. 2, April 1996

Posted: 13 Jun 1998

Abstract

This article analyzes a minimum wage in a market with imperfect information and job search. It establishes that employment effects of a minimum wage do not generally indicate welfare effects. It shows that researchers interested in welfare consequences should ask two questions. First, is the existing minimum wage binding? Second, do some firms that would be bound by a new minimum wage presently experience labor shortages? If the answers to these questions are no and yes, respectively, this article supports the conclusion that a higher minimum wage is welfare improving, regardless of its effect on the unemployment rate.

JEL Classification: J64, J68, D83, J39

Suggested Citation

Swinnerton, Kenneth A., Minimum Wages in an Equilibrium Search Model with Diminishing Returns to Labor in Production. JOURNAL OF LABOR ECONOMICS, Vol. 14, No. 2, April 1996, Available at SSRN: https://ssrn.com/abstract=3104

Kenneth A. Swinnerton (Contact Author)

Bureau of International Labor Affairs ( email )

Room S-5303
Washington, D.C., 20210
United States
202-693-4916 (Phone)
202-693-4851 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
916
PlumX Metrics