In this paper we provide a novel justification for the use of minimum wage rules to supplement the optimal tax-and-transfer system. We demonstrate that if labor supply decisions are concentrated along the intensive margin and employment is efficiently rationed, a minimum wage rule can be...

This paper provides a novel justification for a declining time profile of unemployment benefits that does not rely on moral hazard or consumption-smoothing considerations. We consider a simple search environment with homogeneous workers and low- and high-productivity firms. By introducing a...

This paper shows that increases in the minimum wage rate can have ambiguous effects on the working hours and welfare of employed workers in competitive labor markets. The reason is that employers may not comply with the minimum wage legislation and instead pay a lower subminimum wage rate. If...

The minimum wage rate has been introduced in many countries as a means of alleviating the poverty of the working poor. This paper shows, however, that an imperfectly enforced minimum wage rate causes small firms to face an upward-sloping labor supply schedule. Since this turns these firms into...

This paper provides a model that can account for the almost uniform staggering of wage contracts in some countries as well as for the markedly nonuniform staggering in others. In the model, short and long contracts as well as long contracts concluded in different periods are strategic...

With fixed costs of price and quantity adjustment, output effects of inflation depend on the elasticity of the firm's marginal real revenue. If the elasticity always exceeds minus unity, then output decreases with inflation, while if the elasticity is always less than minus unity, then output...

In this paper, we challenge the conventional wisdom that due to the negative correlation between family size and earning ability, family size can be used as a 'tagging' device, and calls for subsidizing children (via child allowances) to enhance egalitarian objectives. We show that the case for...