De Economist

, Volume 137, Issue 3, pp 279–308 | Cite as

Minimum wage rates and unemployment in The Netherlands

  • Arthur van Soest
Article

Summary

A static limited dependent variable model is formulated to analyse the Dutch labour market from an individual's viewpoint. Results suggest that high minimum labour costs are an important source of unemployment. Secondly, the reduced-form participation equation is replaced by a neoclassical labour supply equation. Thus, also the effect of high minimum wage rates on employment through labour supply is taken into account. Supply appears to be forward bending and participation is insensitive with respect to unemployment benefits. Simulations suggest that the effect of lowering the ‘productivity threshold’ by reducing before-tax minimum wages dominates supply effects.

Keywords

Labour Market Labour Supply Minimum Wage Labour Cost Unemployment Benefit 

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Copyright information

© H.E. Stenfert Kroese B.V. 1989

Authors and Affiliations

  • Arthur van Soest
    • 1
  1. 1.Department of EconometricsTilburg UniversityNetherlands

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