Optimal Minimum Wages in Spatial Economies
Speaker(s)Gabriel Ahlfeldt (London School of Economics, United Kingdom)
LocationErasmus University Rotterdam, Van der Goot Building, room M3-03
Date and time
February 06, 2023
11:30 - 12:30
We develop a quantitative general-equilibrium framework for the normative evaluation of minimum wages in spatial economies with monopsonistic labour markets. We quantify the model for German micro-regions and successfully over-identify its predictions against the effects of the 2015 German minimum wage observed in data. Simulating the model, we find that at low levels, spatially blind national minimum wages canincrease welfare and spatial equity simultaneously. At higher levels, however, welfare gains are traded against employment losses and spatial inequality. Because regionalminimum wages are not spatially blind, they can increase employment and welfare in a spatially neutral manner.
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