Capital mobility, search unemployment and labor market policies: The case of minimum wages

Frédéric Gavrel (1)

1 CREM - Centre de recherche en économie et management

In order to study the in uence of capital mobility on labor market policy, this paper adapts the search-matching approach to an economy with an exogenous stock of capital. Contrary to most matching models, laissez-faire is unavoidably ine cient. However, public policy can neutralize this market failure by implementing a minimum wage. This result leads us to address a much-debated issue: Does capital mobility constrain labor market policies when governments cannot cooperate? To that end we extend the analysis to a n-country symmetric model where the setting of minimum wages results from a Nash non-cooperative game. We nd that, in this context, capital mobility does not a ect the e ciency of public policy.

Mots clés: Capital mobility; Search unemployment; Minimum wage effi ciency

Domaines: Economies et finances

Frédéric Gavrel. Capital mobility, search unemployment and labor market policies: The case of minimum wages. 2013. ⟨halshs-00856270⟩