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Unemployment and Income-Distribution Effects of Economic Growth: A Minimum-Wage Analysis with Optimal Saving

Richard Brecher and Till Gross ()
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Till Gross: Department of Economics, Carleton University, http://www.carleton.ca/economics/people/gross-till-o/

No 17-08, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: Theoretically and numerically, we analyze the unemployment and income-distribution effects of economic growth, in a model with optimal saving (investment) and a minimum wage for unskilled labor. Within this three-factor model (including skilled labor), an exogenous rise in the growth rate increases unemployment if capital and unskilled labor are complements (versus substitutes), implying a trade-off between (faster) growth and (lower) unemployment. We also show how the growth rate affects the skill premium and factor shares of national income, providing little support for Piketty’s (2014) controversial thesis that capital’s share is higher when growth is slower.

Keywords: Optimal growth; Minimum wage; Unskilled unemployment; Income distribution (search for similar items in EconPapers)
JEL-codes: E24 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp, nep-dge, nep-gro and nep-mac
Date: 2017-06-12, Revised 2017-07-14
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Published: Carleton Economic Papers

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Persistent link: https://EconPapers.repec.org/RePEc:car:carecp:17-08

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