Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/175411 
Year of Publication: 
2018
Series/Report no.: 
GLO Discussion Paper No. 188
Publisher: 
Global Labor Organization (GLO), Maastricht
Abstract: 
This paper analyzes the effects of introducing a graduated minimum wage in a model with optimal income taxation in which a government seeks to maximize social welfare. It shows that the optimal graduated minimum wage increases social welfare by increasing the low productivity workers’ consumption and bringing it closer to the first-best. The paper also describes how the graduated minimum wage in a social welfare optimum depends on important economy characteristics such as the government’s revenue needs, the social-welfare weight of low-productivity workers, and the numbers and productivities of the different types of workers.
Subjects: 
Graduated minimum wage
optimal income taxation
social welfare
JEL: 
D60
H21
J30
Document Type: 
Working Paper

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