Is a Minimum Wage an Appropriate Instrument for Redistribution?

Aart Gerritsen and Bas Jacobs

No 4588, CESifo Working Paper Series from CESifo

Abstract: We analyze the redistributive (dis)advantages of a minimum wage over income taxation in competitive labor markets. A minimum wage causes more unemployment, but also leads to more skill formation as unemployment is concentrated on low-skilled workers. A simple condition based on three sufficient statistics shows that a minimum wage is desirable if the social welfare gains of more skill formation outweigh the social welfare losses of increased unemployment. Using a highly conservative calibration, a minimum wage decrease is shown to be part of a Pareto-improving policy reform for all countries under consideration, except possibly the United States.

Keywords: minimum wage; optimal redistribution; unemployment; education (search for similar items in EconPapers)
JEL-codes: D60 H21 H24 J21 J24 J38 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp4588.pdf (application/pdf)

Related works:
Journal Article: Is a Minimum Wage an Appropriate Instrument for Redistribution? (2020)
Working Paper: Is a Minimum Wage an Appropriate Instrument for Redistribution? (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4588

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().