Minimum Wages, Technological Progress and Loss of Skill
University of Aarhus CLS Working Paper No. 98-003
26 Pages Posted: 25 Aug 1999
Date Written: February 1998
Abstract
This paper considers the effect of a productivity shock when the unemployed worker risks a loss of skill. This divides the workers into short-term and long-term unemployment. In this economy, the short-term unemployed and long-term unemployed in the economy search for employment in the most productive sector and in the antiquated sector, respectively. In this framework, the implications of a shock with a minimum wage law is compared to the implications when wages are perfectly flexible. The economic variables considered are short-term and long-term unemployment, wages and wage disparity, and the equilibrium rate of unemployment.
JEL Classification: E2, J4, J6, O3
Suggested Citation: Suggested Citation
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