Discussion paper / School of Business & Economics ; 2011/14 : Economics
Minimum wages; unemployment; hidden information; labour market regulation
331 Labor economics
Individual labour productivities are often unobservable for firms when hiring new workers. Job protection may prevent firms ex post from using information about labour productivities. We show that a binding minimum wage introduced in the presence of job protection will lead to lower unemployment levels than predicted by the standard labour market model with heterogeneous labour and full information.
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