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 for the Study of Labor (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)
New Economics Papers: this item is included in nep-lab, nep-mac, nep-pbe, nep-pol and nep-pub
Date: Written
View list of references View citations in EconPapers

Downloads: (external link)
ftp://repec.iza.org/RePEc/Discussionpaper/dp1570.pdf (application/pdf)

Related works:
Journal Article: Minimum wage or negative income tax: why skilled workers may favor wage rigidities (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:iza:izadps:dp1570

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute for the Study of Labor (IZA)
Address: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Contact information at EDIRC.
Series data maintained by Mark Fallak ().