Minimum Wages, Technological Progress and Loss of Skill.
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.
E20 - Consumption, Saving, Production, Employment, and Investment. General ; J40 - Particular Labor Markets. General ; J60 - Mobility, Unemployment, and Vacancies. General ; O30 - Technological Change; Research and Development. General