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We explain the public’s support for the minimum wage (MW) institution despite economists’ warnings that the MW is a “blunt instrument” for redistribution. To do so we build a model in which workers are heterogeneous in ability, and the government engages in redistribution through the...
Persistent link: https://www.econbiz.de/10012269425
Using an intertemporal model of saving and capital accumulation we demonstrate that it is impossible for any binding minimum wage to increase the after-tax incomes of workers if the production function is Cobb-Douglas with constant returns to scale, or if there are no differences in ability...
Persistent link: https://www.econbiz.de/10010398531
This paper analyzes long run outcomes resulting from adopting a binding minimum wage in a neoclassical model with perfectly competitive labour markets and capital accumulation. The model distinguishes between workers of heterogeneous ability and capitalists who do all the saving, and it entails...
Persistent link: https://www.econbiz.de/10010435748
unemployment benefits; we find that the MW is preferred by the majority of workers (even when the unemployed receive very generous … unemployment benefits). In the second model, the government engages in redistribution through the public provision of private goods … given generosity of the unemployment benefit scheme, the maximum, politically viable, MW is lower than in the absence of in …
Persistent link: https://www.econbiz.de/10011698712
Using an intertemporal model of saving and capital accumulation with two types of agents (workers and capitalists) we demonstrate that it is impossible for any binding minimum wage to increase the after-tax incomes of workers if the production function is Cobb-Douglas with constant returns to...
Persistent link: https://www.econbiz.de/10011522413
Casual empiricism suggests that unwarranted" wage changes, defined as the part of wage growth that is not explained by changes in labour productivity, are negatively associated with the return on capital. The main point of this paper is to show that unwarranted" wage changes have no causal...
Persistent link: https://www.econbiz.de/10010265965