If workers are concerned about their relative wage, this can give rise to continuum of natural rates of unemployment that are perfect foresight equilibria. These equilibria can be Pareto ranked in the same order as their level of employment. Which equilibrium is reached depends upon expectations...

Recent empirical work on the effects of minimum wages has called into question the conventional wisdom that minimum wages invariably reduce employment. The authors develop a model of monopsonistic competition with free entry to analyze the effects of minimum wages and their predictions fit the...