A Macroeconometric Analysis of the Effects of Heterogeneous Labor Markets and the Progressive Minimum Wage

Abstract

This paper constructs a structural equation model that explicitly includes heterogeneous labor markets and evaluates the impact of minimum wage increases on wages, employment, etc. According to a model that divides the labor market into company size and regular/non-regular employment, raising the minimum wage will significantly reduce non-regular employment, but there are differences depending on company size, with employment decreasing in small companies and increasing in large companies. It has been found that setting progressively higher minimum wages for large companies could reduce unemployment and increase wages.