http://repub.eur.nl/res/aut/1137/ List of Publications en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/834/ 2003-09-05T00:00:00Z It is often argued that a mandatory minimum wage is binding only if the wage density displays a spike at it. In this paper we analyze a model with wage setting, search frictions, and heterogeneous production technologies, in which imposition of a minimum wage affects wages even though, after imposition, the lowest wage in the market exceeds the minimum wage, and subseequent abolition of the minimum wage does not affect wages. The model has multiple equilibria as a result of the fact that the reservation wage of the unemployed and the lowest production technology in use affect each other. Under certain conditions, imposition of a minimum wage improves social welfare. http://repub.eur.nl/res/pub/7803/ 1997-04-24T00:00:00Z In the past decades several features of U.S. unemployment dynamics have been investigated empirically. The original focus of research was on the duration of unemployment. In later studies the cyclicality of incidence and duration, compositional effects and duration dependence of the exit rate out of unemployment have been investigated. Unlike the partial approach of previous studies this paper takes all elements of unemployment dynamics simultaneously into account. We find that cyclical fluctuations in unemployment are driven by variations in the incidence, individual exit probabilities and the composition of the inflow into unemployment. We also find negative duration dependence of the unemployment exit rate which can be attributed to employers ranking workers according to the length of their unemployment spell.