Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96706
Authors: 
Danziger, Eliav
Danziger, Leif
Year of Publication: 
2014
Series/Report no.: 
IZA Discussion Paper 8123
Abstract: 
This paper shows that a graduated minimum wage, in contrast to a constant minimum wage, can provide a strict Pareto improvement over what can be achieved with an optimal income tax. The reason is that a graduated minimum wage requires high-productivity workers to work more to earn the same income as low-productivity workers, which makes it more difficult for the former to mimic the latter. In effect, a graduated minimum wage allows the low-productivity workers to benefit from second-degree price discrimination which increases their income.
Subjects: 
graduated minimum wage
Pareto improvement
JEL: 
J30
Document Type: 
Working Paper

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