This paper investigates whether the minimum wage leads to inefficient job rationing. By not allowing wages to clear the labor market, the minimum wage could cause workers with low reservation wages to be rationed out while equally skilled workers with higher reservation wages are employed. This...

This paper investigates whether the minimum wage leads to inefficient job rationing. By not allowing wages to clear the labor market, the minimum wage could cause workers with low reservation wages to be rationed out while equally skilled workers with higher reservation wages are employed. This...

Faced with more favourable demand conditions, many firms raise wages. However, we show that firms with labour market power, lower productivity, and binding wage floors will absorb these positive revenue productivity shocks as excess profits instead of increasing wages or employment. Our...