Scandinavian Working Papers in Economics
Umeå Economic Studies,
Umeå University, Department of Economics
No 906: The Minimum Wage and a Non-Competitive Market for Qualifications
Gauthier Lanot () and Panos Sousounis ()
Additional contact information
Gauthier Lanot: Department of Economics, Umeå School of Business and Economics, Postal: Umeå University, S 901 87 Umeå, Sweden
Panos Sousounis: Keele Management School, Postal: Keele University, Keele, ST5 5BG, UK
Abstract: In this paper we consider an equilibrium model of demand and supply for several qualifications first in a competitive setting and then in a non-competitive setting. We propose a tractable analytical framework, i.e. when workers choose between qualifications according to a multinomial logit model of choice and when a CES production function describes the substitutions possibilities between the different types of labour. While in the competitive case the effects of the minimum wage are those we expect, in the imperfectly competitive case we find that a minimum wage can create unemployment and we find that the welfare of the population as a function of the minimum wage is not unimodal. We show furthermore that allowing one qualification to be exempted from the minimum wage does not mean that its relative demand is unaffected by changes to the minimum wage.
Keywords: Minimum wage; wage differentials; segmented labour markets; monopsony
49 pages, April 8, 2015
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