Minimum wage or negative income tax: why skilled workers may favor wage rigidities

Arbeitspapier

This article studies the political choice over the extent and the means of income redistribution between high and low skilled workers. Redistributive tools encompass fiscal transfers with negative income tax and minimum wage. Using fiscal instruments only is assumed optimal. We show that high skilled workers may favor a second-best minimum wage requirement. This is because minimum wage increases unemployment, hence the marginal cost of redistribution is higher which gives a pretext for high skilled workers to moderate low skilled workers claim for income redistribution.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 1570

Classification and Topics

• Classification: Wirtschaft ; Positive Analysis of Policy Formulation and Implementation ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Wages, Compensation, and Labor Costs: Public Policy
• Subject: unemployment ; political economics ; income redistribution ; minimum wage

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bacache-Beauvallet, Maya ; Lehmann, Etienne
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/33411
• Last update: 10.03.2025, 11:42 AM CET