A Pareto-Improving Minimum Wage

Arbeitspapier

This paper shows that a graduated minimum wage, in contrast to a constant minimum wage, can provide a strict Pareto improvement over what can be achieved with an optimal income tax. The reason is that a graduated minimum wage requires high-productivity workers to work more to earn the same income as low-productivity workers, which makes it more difficult for the former to mimic the latter. In effect, a graduated minimum wage allows the low-productivity workers to benefit from second-degree price discrimination which increases their income.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4762

Classification and Topics

• Classification: Wirtschaft ; Wages, Compensation, and Labor Costs: General
• Subject: graduated minimum wage ; Pareto improvement

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Danziger, Eliav ; Danziger, Leif
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/96900