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The Minimum Wage and Labor Market Outcomes : The MIT Press - Christopher J. Flinn

The Minimum Wage and Labor Market Outcomes

The MIT Press

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In "The Minimum Wage and Labor Market Outcomes, " Christopher Flinn argues that in assessing the effects of the minimum wage (in the United States and elsewhere), a behavioral framework is invaluable for guiding empirical work and the interpretation of results. Flinn develops a job search and wage bargaining model that is capable of generating labor market outcomes consistent with observed wage and unemployment duration distributions, and also can account for observed changes in employment rates and wages after a minimum wage change. Flinn uses previous studies from the minimum wage literature to demonstrate how his model can be used to rationalize and synthesize the diverse results found in widely varying institutional contexts. He also shows how observed wage distributions from before and after a minimum wage change can be used to determine if the change was welfare-improving. More ambitiously, and perhaps controversially, Flinn proposes the construction and formal estimation of the model using commonly available data; model estimates then enable the researcher to determine directly the welfare effects of observed minimum wage changes. This model can be used to conduct counterfactual policy experiments--even to determine "optimal" minimum wages under a variety of welfare metrics. The development of the model and the econometric theory underlying its estimation are carefully presented so as to enable readers unfamiliar with the econometrics of point process models and dynamic optimization in continuous time to follow the arguments. Although most of the book focuses on the case where only the unemployed search for jobs in a homogeneous labor market environment, later chapters introduce on-the-job search into the model, and explore its implications for minimum wage policy. The book also contains a chapter describing how individual heterogeneity can be introduced into the search, matching, and bargaining framework.

Industry Reviews

"One of the more intriguing undercurrents in research on minimum wages over the last two decades has been the reevaluation of the predicted effects of minimum wages in labor market models characterized by search frictions, rather than the standard competitive model. Flinn does an outstanding job both synthesizing this technically difficult literature and showing how the search framework can be used to evaluate not only the employment effects of minimum wages but also their welfare implications. An invaluable contribution to the research literature on minimum wages and on job search models more generally." David Neumark, Professor of Economics, University of California, Irvine "This book provides an impressive analysis of a wide range of consequences of the minimum wage in a dynamic framework accounting for labor market frictions. Essential for all those who want to understand the impact of the minimum wage." Pierre Cahuc, Professor of Economics, Ecole Polytechnique, coauthor of Labor Economics

Prefacep. xi
Introductionp. 1
Plan of the Bookp. 2
Theoretical Perspectives on the Minimum Wagep. 3
Brief History of the Minimum Wage in the United Statesp. 10
State Minimum Wagesp. 14
Descriptive Evidence on Minimum Wage Effectsp. 17
The Data Sourcep. 18
Who Are the Minimum Wage Workers?p. 24
Impacts of Minimum Wage Changes on Wagesp. 28
A Model of Minimum Wage Effects on Labor Market Careersp. 35
Characterization of the Labor Market Careerp. 38
The Stationary Labor Market Environmentp. 41
The Decision-Theoretic Modelp. 43
Nash-Bargained Employment Contractsp. 53
The Search-Bargaining Model without Minimum Wagesp. 56
Bargaining with a Minimum Wage Constraintp. 61
The Labor Market Participation Decisionp. 66
Endogeneity of the Rate of Contactsp. 67
Labor Market and Welfare Impacts of Minimum Wagesp. 73
Minimum Wages and Labor Market Statusp. 73
Minimum Wages and Unemploymentp. 74
The Impact of Minimum Wage Changes on Wage Distributionsp. 80
Welfare Measuresp. 82
General Welfare Criteriap. 82
Specific Welfare Measuresp. 84
Minimum Wage Effects on Labor Market Outcomes: A Selective Surveyp. 95
Surveys of Empirical Studies of Minimum Wage Effectsp. 96
Empirical Studies of ôLarge Impactsö and Methodological Innovationsp. 97
Pereira (2003)p. 97
Bell (1997)p. 100
Campolieti et al. (2005)p. 101
Machin et al. (2003)p. 104
Dinardo et al. (1996)p. 105
Alternative Behavioral Frameworksp. 108
Meyer and Wise (1983a, b)p. 108
Van den Berg (2003)p. 110
Eckstein and Wolpin (1990)p. 111
Van den Berg and Ridder (1998)p. 113
Assessing the Welfare Impacts of Actual Changes in the Minimum Wagep. 117
Results Using Unconditional Wage Distributionsp. 119
Results for Conditional Wage Distributionsp. 121
Results Using Matched Datap. 124
Welfare Impacts of the 1996 and 1997 Statutory Minimum Wage Increasesp. 125
Tests Utilizing Cross-sectional Wage Distributionsp. 126
Tests Utilizing Panel Datap. 127
Data and Empirical Resultsp. 129
Cross-sectional Wage Distribution Resultsp. 131
Empirical Analysis Using the Matched CPS Samplep. 136
Econometric Issuesp. 141
Identification of Choice-Theoretic Search Modelsp. 141
Estimation of the Bargaining Modelp. 147
Model Identificationp. 152
No Minimum Wagep. 153
Binding Minimum Wagep. 156
Some Additional Identification Devicesp. 158
Use of Demand Side Information to Estimate p. 159
Estimation of Demand Side Parametersp. 162
Model Estimates and Testsp. 167
Parameter Estimates Using Profit Informationp. 169
Estimates of Demand Side Parameters and the Matching Functionp. 175
Model Fitp. 179
Optimal Minimum Wagesp. 185
On-the-Job Searchp. 195
Introductionp. 195
Model Specificationsp. 198
The Model with Renegotiationp. 200
The Model without Renegotiationp. 207
Examplesp. 208
Endogenous Contact Ratesp. 212
Specification of the Matching Function with OTJ Searchp. 212
Labor Market Participation Decisionsp. 215
Estimation Issuesp. 216
Estimation Resultsp. 221
Optimal Minimum Wages with OTJ Searchp. 225
Heterogeneityp. 229
Introducing Heterogeneity into the Basic Search Modelp. 230
Detecting Heterogeneityp. 237
Observed Heterogeneityp. 242
Unobserved Heterogeneityp. 244
An Extended Examplep. 248
Implications of Heterogeneity for Equilibrium and Labor Market Policiesp. 255
General Equilibrium and Heterogeneityp. 256
Policy Implicationsp. 257
Conclusionp. 261
Theoryp. 261
Limitations of the Modeling Frameworkp. 262
Empirical Findings and Lessonsp. 264
Appendix: Proofs of Selected Propositions from Chapter 7p. 269
Notesp. 273
Indexp. 293
Table of Contents provided by Ingram. All Rights Reserved.

ISBN: 9780262013239
ISBN-10: 0262013231
Series: The MIT Press
Audience: Professional
For Ages: 18+ years old
Format: Hardcover
Language: English
Number Of Pages: 320
Published: 4th February 2011
Country of Publication: US
Dimensions (cm): 22.9 x 15.2  x 1.9
Weight (kg): 0.56

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