Minimum Wage Legislation and Economic Growth: Channels and Effects

Pak-Hung Mo

MPRA Paper from University Library of Munich, Germany

Abstract: Despite decades of experience and research, the effects of minimum wage legislation (MWL) on long-run economic performance have rarely been studied since Stigler’s (1946) classic exposition about the shortcomings of MWL. In this study, we use a novel method to estimate the magnitude and transmission channels by which MWL affect productivity and GDP growth. Our results suggest that countries with MWL have a growth rate of about 20 to 30 percent lower than the sample mean. Although the initial impacts are small, in the ‘steady state’ where the marginal effect of the legislation years equals zero, a country will have a growth rate of about 30 to 38 percent lower than the average.

Keywords: minimum wage; GDP growth; private investment; government size; government investment; population growth (search for similar items in EconPapers)
JEL-codes: C52 D78 E02 I38 J58 O12 O15 O38 O43 (search for similar items in EconPapers)
Date: 2011-12
New Economics Papers: this item is included in nep-fdg and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:35820

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