Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105102
Authors: 
Economides, George
Moutos, Thomas
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 5052
Abstract: 
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.
Subjects: 
minimum wage
capital accumulation
redistribution
unemployment
JEL: 
E21
E24
E64
H23
J23
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.