Minimum wages as a redistributive device in the long run
"This paper analyzes long run outcomes resulting from adopting a binding minimum wage in a neoclassical model with perfectly competitive labour markets and capital accumulation. The model distinguishes between workers of heterogeneous ability and capitalists who do all the saving, and it entail...
| 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-19115499124919336719-Minimum-wages-as-a-redistribut.htm |
| Summary: | "This paper analyzes long run outcomes resulting from adopting a binding minimum wage in a neoclassical model with perfectly competitive labour markets and capital accumulation. The model distinguishes between workers of heterogeneous ability and capitalists who do all the saving, and it entails – relative to the perfectly competitive benchmark - large output and employment losses (among the lowest-ability workers) from the imposition of moderately binding minimum wages. Yet, with linear taxation in place, all employed workers can become better-off provided that the unemployed receive limited welfare support. With progressive taxation in place, the minimum wage may garner political support (i.e. a majority) even when the unemployed receive substantial welfare support despite potential opposition from the capitalists and the unemployed, as well as from the very-high ability workers whose net-of-taxes incomes decline." |
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| Physical Description: | 46 p. Digital |