Is a minimum wage an appropriate instrument for redistribution?
"We analyze the redistributive (dis)advantages of a minimum wage over income taxation in competitive labor markets. A minimum wage causes more unemployment, but also leads to more skill formation as unemployment is concentrated on low-skilled workers. A simple condition based on three sufficien...
Main Authors: | , |
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Institution: | ETUI-European Trade Union Institute |
Format: | TEXT |
Language: | English |
Published: |
Munich
2014
CESifo |
Subjects: | |
Online Access: | https://www.labourline.org/KENTIKA-19110743124919389259-is-a-minimum-wage-an-appropria.htm |
Summary: | "We analyze the redistributive (dis)advantages of a minimum wage over income taxation in competitive labor markets. A minimum wage causes more unemployment, but also leads to more skill formation as unemployment is concentrated on low-skilled workers. A simple condition based on three sufficient statistics shows that a minimum wage is desirable if the social welfare gains of more skill formation outweigh the social welfare losses of increased unemployment. Using a highly conservative calibration, a minimum wage decrease is shown to be part of a Pareto-improving policy reform for all countries under consideration, except possibly the United States." |
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Physical Description: | 45 p. Digital |