On economic growth and minimum wages

Luciano Fanti and Luca Gori ()

MPRA Paper from University Library of Munich, Germany

Abstract: We offer an analysis of the existence of a positive relationship between minimum wages and economic growth in a simple one-sector overlapping generations economy where the usual Romer-typed knowledge spill-over mechanism in production represents the engine of endogenous growth, in the case of both homogeneous and heterogeneous (i.e., skilled and unskilled) labour. Assuming also the existence of unemployment benefits financed with consumption taxes not conditioned on age at a balanced budget, it is shown that minimum wages may stimulate economic growth and welfare despite the unemployment occurrence. Moreover, a growth-maximising minimum wage can exist. A straightforward message, therefore, is that a combination of minimum wage and unemployment benefit policies can appropriately be used to promote balanced growth and 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: 2010-10-12
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: On economic growth and minimum wages (2011)
Working Paper: On economic growth and minimum wages (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:25842

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