Taxes, Redistribution, and the Minimum Wage: A Theoretical Analysis

Stephen P. Allen

The Quarterly Journal of Economics, 1987, vol. 102, issue 3, 477-489

Abstract: This paper considers a simple general equilibrium model that contains two types of workers with differing levels of ability and a social-welfare-maximizing government. The paper shows that social welfare can sometimes be increased by supplementing an optimal linear income tax with a minimum wage, but that social welfare can never be increased by supplementing an optimal nonlinear income tax with a minimum wage.

Date: 1987
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