Optimal minimum wage in a competitive economy

Arbeitspapier

This paper studies the use of a minimum wage law to implement the optimal redistribution policy when a distorting tax-transfer scheme is also available. The authors build a static general equilibrium model with a Ramsey planner making decisions on taxes, transfers, and minimum wage levels. Workers are assumed to differ only in their productivity. The authors find that optimal redistribution may imply the use of only taxes and transfers, only a minimum wage, or the proper combination of both policies. The key factor driving their results is the reaction of the demand for low-skilled labor to the minimum wage law. Hence, an optimal minimum wage appears to be most likely when low-skilled households are scarce, the complementarity between the two types of workers is large, or the difference in productivity is small.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2004-30

Classification and Topics

• Classification: Wirtschaft
• Subject: Mindestlohn ; Optimale Besteuerung ; Einkommensumverteilung ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gorostiaga, Arantza ; Rubio-Ramírez, Juan Francisco
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Atlanta
• (where): Atlanta, GA
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/100930
• Last update: 10.03.2025, 11:43 AM CET