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 `a la Romer (J Polit Econ 94:1002–1037, 1986), in the case of both homogeneous and heterogeneous labour and without considering any growth-sustaining externalities which the minimum wage can generate. Assuming also the existence of unemployment benefits financed with balanced-budget consumption taxes not conditional upon age, we show that the minimum wage can promote economic growth and welfare despite the occurrence of unemployment. There may also exist a growth- and welfare-maximising minimum wage.

On economic growth and minimum wages

GORI, LUCA
2011-01-01

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 `a la Romer (J Polit Econ 94:1002–1037, 1986), in the case of both homogeneous and heterogeneous labour and without considering any growth-sustaining externalities which the minimum wage can generate. Assuming also the existence of unemployment benefits financed with balanced-budget consumption taxes not conditional upon age, we show that the minimum wage can promote economic growth and welfare despite the occurrence of unemployment. There may also exist a growth- and welfare-maximising minimum wage.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11567/258401
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