Dynamic effects of minimum wage on growth and innovation in a Schumpeterian economy

Angus Chu, Zonglai Kou and Xilin Wang

Economics Letters, 2020, vol. 188, issue C

Abstract: We explore the dynamic effects of minimum wage in a Schumpeterian model with endogenous market structure and obtain the following results. First, raising the minimum wage decreases the employment of low-skill workers and increases the unemployment rate. Second, it decreases the level of output. Third, it decreases the transitional growth rate of output but does not affect the steady-state growth rate. Our quantitative analysis shows that the magnitude of the negative effects of minimum wage is sharply increasing in low-skill labor intensity in production and that employed low-skill workers gain initially but might suffer from slower growth in future wages.

Keywords: Minimum wage; Unemployment; Innovation; Endogenous market structure (search for similar items in EconPapers)
JEL-codes: E24 O30 O40 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Dynamic Effects of Minimum Wage on Growth and Innovation in a Schumpeterian Economy (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:188:y:2020:i:c:s0165176520300033

DOI: 10.1016/j.econlet.2020.108943

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