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On economic growth and minimum wages

Luciano Fanti () and Luca Gori ()

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: We offer an analysis of the existence of a positive relationship between minimum wages and economic growth in a fairly standard general equilibrium, one-sector, two-period overlapping generations model, where the usual Romer-typed knowledge spill-over mechanism in production represents the engine of endogenous growth. It is shown that - contrary to the conventional view which has failed to pay due attention to dynamic contexts with labour market rigidities - the minimum-wage economy may grow faster than the competitive-wage economy in spite of a reduced employment rate and, in particular, a growth-maximising minimum wage does exist. A straightforward message is therefore that policymakers may appropriately use minimum wage policies to promote economic growth and individuals' welfare.

Keywords: Endogenous growth; Minimum wage; Unemployment; OLG model (search for similar items in EconPapers)
JEL-codes: H24 J60 O41 (search for similar items in EconPapers)
Date: 2009-01-01
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-lab
Note: ISSN 2039-1854
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Related works:
Journal Article: On economic growth and minimum wages (2011) Downloads
Working Paper: On economic growth and minimum wages (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2009/78

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