Wage posting in two-sided search and the minimum wage

This article focuses on wage formation in an equilibrium (two-sided) model of search with match-specific heterogeneity. Despite a large number (a cont inuum) of employers, search provides sufficient isolation to generate marke t power. By posting wages, employers, without collusion, capture most of th e surplus that accrues to any match. The equilibrium wage is below that whi ch maximizes employment. An example, using calibrated parameter values, is used to reconcile some recent, otherwise contradictory empirical results on the employment effects of minimum wage adjustments.