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Minimum Wage Shocks in an Estimated DSGE Model with Underreporting

Alisher Tolepbergen ()

No 20, NAC Analytica Working Paper from NAC Analytica, Nazarbayev University

Abstract: We build and estimate a New Keynesian DSGE model to analyze the macroeconomic effects of minimum wage shocks in an economy characterized by a high degree of wage underreporting. The estimation results suggest that the effect of the minimum wage shocks to all economic aggregates but employment is not significant. The impulse response analysis shows that a higher degree of underreporting results in less responsive dynamics to the minimum wage shocks. In addition, the magnitude of the responses is also affected by the share of Non-Ricardian households in the economy. Overall, we find that an increase in the minimum wage in the economy with a high degree of underreporting does not significantly affect the dynamics of macroeconomic variables.

Keywords: DSGE; Minimum Wage; Underreporting; Non-Ricardian; Bayesian Estimation. (search for similar items in EconPapers)
JEL-codes: C11 E24 E26 E64 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2021-10, Revised 2021-12
New Economics Papers: this item is included in nep-dge, nep-iue and nep-mac
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