 The macroeconomics of the minimum wageJournal of Macroeconomics, 2018, vol. 56, issue C, 89-112 Abstract: This paper studies the macroeconomic impact of a statutory minimum wage. I demonstrate by means of a medium-scale DSGE model, which I estimate with US data, how the minimum wage impacts aggregate variables. The model framework enables me to take into account various general-equilibrium effects that the minimum wage can potentially trigger. Under the estimated stance of monetary policy, the model predicts that the minimum wage has a negligible effect on the macroeconomy. However, if the Federal Reserve conducted highly dovish monetary policy, the federal minimum wage would substantially affect the macroeconomy. A minimum-wage hike would even cause an economic expansion. The paper also examines the possibility of indexing the minimum wage to an inflation measure. It compares the indexation to price inflation with the indexation to wage inflation. By considering an alternative estimated model, I present evidence that performance standards are an important adjustment channel through which firms react to changes in the minimum wage. Keywords: Minimum; wageMacroeconomyUnemploymentEffortMonetary; policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:56:y:2018:i:c:p:89-112 DOI: 10.1016/j.jmacro.2018.01.003 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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