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MINIMUM WAGE AND SEVERANCE PAYMENTS IN A FRICTIONAL LABOR MARKET: THEORY AND ESTIMATION

Published online by Cambridge University Press:  03 July 2017

Carolina Silva
Carolina Silva*
Affiliation:
Universidad de Alicante
*
Address correspondence to: Carolina Silva, Ibn Gabirol 40, Apartment 6, 6436405 Tel Aviv, Israel; e-mail: carolina.silva@post.idc.ac.il.
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Abstract

Wage dispersion is a critical factor in determining the impact of a minimum wage and severance payments on job creation and destruction in a general equilibrium model with search frictions. When wage dispersion is low, the minimum wage and severance payments behave as substitutes. However, as dispersion in wages increases, these policies become complements. The model is estimated using data from Chile and used to perform quantitative welfare analysis.

Keywords

Search ModelMinimum WageSeverance PaymentsWelfare
Type
Articles
Information
Macroeconomic Dynamics , Volume 21 , Issue 7 , October 2017 , pp. 1561 - 1600
Copyright
Copyright © Cambridge University Press 2017 

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Footnotes

Financial support from the Ministry of Science and Feder Funds, under Project SEJ-2007-62656, is gratefully acknowledged. I am grateful to Giuseppe Moscarini, Björn Brügemann, Eduardo Engel, David Weiss and Marcello Sartarelli for helpful comments and suggestions.

References

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