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
Luciano Fanti;Luca Gori
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.File | Dimensione | Formato | |
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