Incidence Analysis of a Sector-Specific Minimum Wage in a Two-Sector Harris-Todaro Model

M. Hasan Imam and John Whalley

The Quarterly Journal of Economics, 1985, vol. 100, issue 1, 207-224

Abstract: In this paper we explore the incidence of a sector-specific minimum wage in a two-sector Harris-Todaro model with intersectorally mobile capital. In addition to the output and substitution effects in Harberger's tax incidence analysis, an additional effect reflecting the endogenously generated unemployment arises in the Harris-Todaro case. We also explore the functional incidence issue numerically for Mexico by using general equilibrium computational techniques. In a number of the calculations reported, capital more than bears the income loss from unemployment caused by the sector-specific minimum wage.

Date: 1985
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