%0 Report
        %A Berg, Gerard J. van den
        %T Multiple Equilibria and Minimum Wages in Labor Markets with Informational Frictions and Heterogeneous Production Technologies
        %D 2003
        %8 2003 Jun
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 806
        %U https://www.iza.org/publications/dp806
        %X It is often argued that a mandatory minimum wage is binding only if the wage density displays
a spike at it. In this paper we analyze a model with search frictions and heterogeneous
production technologies, in which imposition of a minimum wage affects wages even though,
after imposition, the lowest wage in the market exceeds the minimum wage. The model has
multiple equilibria as a result of the fact that the reservation wage of the unemployed and the
lowest production technology in use affect each other. Imposition of a minimum wage may
improve social welfare.
        %K matching
%K productivity
%K job search
%K unemployment
%K imperfect information
%K equilibrium
%K labor market policy
%K wages
%K congestion