Do Labor Market Rigidities Fulfill Distributive Objectives?: Searching for the Virtues of the European Model

Gilles Saint-Paul

IMF Staff Papers, 1994, vol. 41, issue 4, 624-642

Abstract: The distributional effects of the minimum wage are analyzed in a model where skilled and unskilled labor are inputs into the production function. It is argued that distributional goals are best achieved by letting the labor market clear itself and achieving redistribution through taxes and transfers. The results stand up to the imposition of the additional constraint of political viability, although skilled workers may be harmed by excessive equilibrium tax rates under the second system.

JEL-codes: E24 E6 H21 H23 H55 J3 (search for similar items in EconPapers)
Date: 1994
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