Minimum Wage and Welfare
Abstract/Contents
- Abstract
- What is the optimal minimum wage? We provide a novel characterization of oligopsonistic labor markets under minimum wages with worker and firm heterogeneity. We then characterize how a macroeconomy with many such markets aggregates to yield two ‘wedges’ implied by minimum wages. The first is an aggregate shadow markdown, that narrows with minimum wage hikes, then tightens as many firms ration employment. The second reflects misallocation, which improves for small values of the minimum wage but steeply worsens at higher values. In our quantitative model, which features worker heterogeneity and replicates recent empirical papers in the minimum wage literature, these effects yield a hump-shaped profile of welfare with respect to the minimum wage.
Description
| Type of resource | text |
|---|---|
| Date created | September 1, 2021 |
Creators/Contributors
| Author | Berger, David |
|---|---|
| Author | Herkenhoff, Kyle |
| Author | Mongey, Simon |
| Organizer of meeting | Hurst, Erik |
| Organizer of meeting | Kehoe, Patrick |
| Organizer of meeting | Pastorino, Elena |
Subjects
| Subject | labor markets |
|---|---|
| Subject | market structure |
| Subject | oligopsony |
| Subject | minimum wages |
| Subject | inequality |
| Genre | Text |
| Genre | Working paper |
| Genre | Grey literature |
Bibliographic information
Access conditions
- Use and reproduction
- User agrees that, where applicable, content will not be used to identify or to otherwise infringe the privacy or confidentiality rights of individuals. Content distributed via the Stanford Digital Repository may be subject to additional license and use restrictions applied by the depositor.
- License
- This work is licensed under a Creative Commons Attribution 4.0 International license (CC BY).
Preferred citation
- Preferred citation
- Berger, D., Herkenhoff, K., and Mongey, S. (2022). Minimum Wage and Welfare. Stanford Digital Repository. Available at https://purl.stanford.edu/tp574dk6854
Collection
SITE Conference 2021
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- siteworkshop@stanford.edu
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