Minimum Wage or Negative Income Tax: Why Skilled Workers May Favor Wage Rigidities

Maya Bacache-Beauvallet () and Etienne Lehmann ()

No 1570, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This article studies the political choice over the extent and the means of income redistribution between high and low skilled workers. Redistributive tools encompass fiscal transfers with negative income tax and minimum wage. Using fiscal instruments only is assumed optimal. We show that high skilled workers may favor a second-best minimum wage requirement. This is because minimum wage increases unemployment, hence the marginal cost of redistribution is higher which gives a pretext for high skilled workers to moderate low skilled workers claim for income redistribution.

Keywords: unemployment; political economics; income redistribution; minimum wage (search for similar items in EconPapers)
JEL-codes: D78 E24 H23 J38 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2005-04
New Economics Papers: this item is included in nep-lab, nep-mac, nep-pbe, nep-pol and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published - published as 'Minimum wage or negative income tax: why skilled workers may favor wage rigidities' in: Spanish Economic Review, 2008, 10 (1), 63-81

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Journal Article: Minimum wage or negative income tax: why skilled workers may favor wage rigidities (2008)
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