 Is a Minimum Wage an Appropriate Instrument for Redistribution?Aart Gerritsen and Bas Jacobs Economica, 2020, vol. 87, issue 347, 611-637 Abstract: We analyse the redistributional (dis)advantages of a minimum wage over income taxation in competitive labour markets without imposing assumptions on the (in)efficiency of labour rationing. Compared to a distributionally equivalent tax change, a minimum‐wage increase raises involuntary unemployment, but also raises skill formation as some individuals avoid unemployment. A minimum wage is an appropriate instrument for redistribution if and only if the public revenue gains from additional skill formation outweigh both the public revenue losses from additional unemployment and the utility losses of inefficient labour rationing. We show that this critically depends on how labour rationing is distributed among workers. A necessary condition for the desirability of a minimum‐wage increase is that the public revenue gains from higher skill formation outweigh the revenue losses from higher unemployment. We write this condition in terms of measurable sufficient statistics. Date: 2020 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:econom:v:87:y:2020:i:347:p:611-637 Ordering information: This journal article can be ordered from Access Statistics for this article Economica is currently edited by Frank Cowell, Tore Ellingsen and Alan Manning More articles in Economica from London School of Economics and Political Science Contact information at EDIRC. |
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