tag:blogger.com,1999:blog-1740670447258719504.post954542054714705688..comments2024-03-27T03:00:27.024-04:00Comments on Facts & other stubborn things: Two quick minimum wage linksEvanhttp://www.blogger.com/profile/12259004160963531720noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-1740670447258719504.post-24943026135009541792014-02-22T06:58:22.596-05:002014-02-22T06:58:22.596-05:00Actually, I realised too late that I should have r...Actually, I realised too late that I should have read Jonathan Catalan's actual post. I had jumped to conclusions that he was citing Daniel Kahneman's recent book for a general audience (<i>Thinking, Fast and Slow</i>). I also thought that he was referring to a statement by Daniel Kahneman on the nominal wage rigidity. Sorry about that!Blue Aurorahttps://www.blogger.com/profile/02044362251868221897noreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-84862899938299322412014-02-22T06:51:04.371-05:002014-02-22T06:51:04.371-05:00These are great thoughts. Yes - it's precisely...These are great thoughts. Yes - it's precisely the Alchian-Allen effect.<br /><br />Funny story - I was talking about Thomas Mun's thoughts on the carry trade during our discussion of mercantilism in the HET class last semester. I was grasping at the term "Alchian Allen Effect" but couldn't quite put my finger on it (he was hitting a lot of the same points when he was talking about shipping spices from India). Anyway, I was floundering, just explained the point, and never could recall what the effect was called on the spot there.Daniel Kuehnhttp://www.factsandotherstubbornthings.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-64705598115279328912014-02-22T06:48:14.627-05:002014-02-22T06:48:14.627-05:00I think at Jonathan discusses is fine - why is it ...I think at Jonathan discusses is fine - why is it inappropriate? I don't see how nominal wage rigidity or money illusion are relevant to the point he is making.Daniel Kuehnhttp://www.factsandotherstubbornthings.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-60898646188837511902014-02-22T00:15:42.557-05:002014-02-22T00:15:42.557-05:00Daniel Kuehn: I have a comment on the first point ...Daniel Kuehn: I have a comment on the first point - wouldn't it be more appropriate for you and Jonathan Catalan to refer to the research papers written by Daniel Kahneman and his other colleagues in behavioural economics, economic psychology, and other similar domains (e.g. Truman Bewley's book)? IIRC, Amos Tversky published some papers dealing with nominal wage rigidity and the money illusion a few years before he passed away.Blue Auroranoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-55610612403864212532014-02-21T12:31:45.209-05:002014-02-21T12:31:45.209-05:00#2 is very interesting. If the minimum wage does c...#2 is very interesting. If the minimum wage does change both worker and employer strategy, such that both prefer and expect longer job tenure (as the Brochu and Green paper seems to suggest), then the minimum wage might make out-of-town/state workers better hires. What information does the employer get from knowing that a worker has to make a long commute? On average, due to the Alchian-Allen effect, the long-distance applicants will be of higher quality than local applicants: the fixed commuting cost filters out workers who would value the job less, and possibly select for positive attributes such as conscientiousness. Long commutes would also negatively select for workers who can't find a job near home, but that's true before the minimum wage and shouldn't affect changes in employment. The minimum wage allows employers to find higher quality workers, which shifts labor demand right, weakening static disemployment effects. <br /><br />On the other hand, if paying higher wages gives employers a way to hire more productive workers (from this mechanism(, there needs to be a reason that employers did not offer higher wages before the minimum wage. Two thoughts that come to mind: first, minimum wage employers tend to filter workers on the job. Give good workers raises, push poor workers out. Raising the minimum wage raises the cost of discovering the quality of a worker on-the-job, making substitute sources of information more attractive. Second, a minimum wage lowers the cost to job-searchers of finding above-reservation-wage (or above-reservation for a long commute wage) salary data. Ryan Langrillhttps://www.blogger.com/profile/15080552998325983982noreply@blogger.com