Deserving Poor and the Desirability of a Minimum Wage

Tomer Blumkin () and Leif Danziger ()
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Tomer Blumkin: Ben Gurion University

No 8418, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper provides a novel justification for using a minimum wage to supplement an optimal tax-and-transfer system. We demonstrate that if labor supply decisions are concentrated along the intensive margin and employment is efficiently rationed, a minimum wage can be socially beneficial by serving as a screening device that targets benefits to the deserving poor. We also show that with a minimum wage in place, a negative marginal tax rate may not be optimal.

Keywords: deserving poor; minimum wage; redistribution; efficient rationing; negative marginal tax rate (search for similar items in EconPapers)
JEL-codes: D6 H2 H5 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2014-08
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (2)

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