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Journal of Evolutionary Economics

, Volume 22, Issue 2, pp 235–250 | Cite as

Employment cycles, low income work and the dynamic impact of wage regulations. A macro perspective

  • Peter FlaschelEmail author
  • Alfred Greiner
  • Camille Logeay
  • Christian Proano
Regular Article

Abstract

In this paper we investigate, against the background of Goodwin’s (1967) growth cycle model, a dual labor market economy and the consequences of introducing an unemployment benefit system and minimum wages in the second labor market and a maximum wage barrier in the first one. In the framework with free ‘hiring’ and firing’ in the both labor markets we show (a) that in fact maximum real wages in the first labor market not only reduce the volatility of this labor market, but also provide global stability to the system dynamics if they are locally explosive, and (b) that larger fluctuations in employment can be made (at least partially) socially acceptable through a (workfare oriented) unemployment benefit system augmented by minimum wage in the low income segment of the labor market.

Keywords

Distributive cycles Low-income work Minimum/maximum real wages Unemployment benefits 

JEL Classification

E32 E64 

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Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  • Peter Flaschel
    • 1
    Email author
  • Alfred Greiner
    • 1
  • Camille Logeay
    • 2
  • Christian Proano
    • 3
  1. 1.Bielefeld UniversityBielefeldGermany
  2. 2.University for Applied Sciences Berlin (Hochschule für Technik und Wirtschaft), BerlinBerlinGermany
  3. 3.The New School for Social Research and Macroeconomic Policy Institute (IMK) in the Hans-Böckler FoundationNew YorkUSA

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