Human Capital and Economic Growth in a Minimum-Wage Economy

Kaz Miyagiwa ()

International Economic Review, 1989, vol. 30, issue 1, 187-202

Abstract: An increased stock of physical capital, within a Brecher-type minimum-wage economy with skilled and unskilled labor, may reduce national income in the short run. However, if capital accumulation stimulated the formation of human capital, the long-run level of national income can exceed its pregrowth level. The conditions are derived under which such reversals occur. It is also shown that correcting the distortions due to the minimum wage requires an additional instrument besides the economy-wide employment subsidy. A tax on the unskilled wage and an education subsidy are examined as possible second instruments. Copyright 1989 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1989
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