A large body of empirical literature indicates that, contrary to predictions from economic theory, wages in the informal sector increase after any minimum wage hike. This phenomenon was so far explained as a byproduct of a signal conveyed by statutory minimum wages to wage setting in the...

Building a model with three imperfect markets - goods, labor and credit - representing a product's life-cycle, we find that goods market frictions drastically change the qualitative and quantitative dynamics of labor market variables. The calibrated model leads to a significant reduction in the...

It is often claimed that growing labor market imperfections and maladjustments can be blamed for the increase and persistence of unemployment in the Federal Republic of Germany. This paper attempts to marshall the empirical importance of these factors. Higher structural unemployment seems to be...

According to recent and largely untested theories, unemployment benefits (UBs) could improve the extent and quality of job reallocation even at the cost of increasing unemployment. Using yearly panel data from a large number of countries, we evaluate empirically the relationship between...

This paper suggests that in the US context, workers tend to invest in general human capital especially since they face little employment protection and low unemployment benefits, while the European model (generous benefits and higher duration of jobs) favors specific human capital investments....