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On the Long‐Run Growth Effects of a Minimum Wage for a Two‐Sector Economy

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  • PASQUALE M. SGRO
  • AKIRA TAKAYAMA

Abstract

This paper investigates the effect of (nationally enforced) minimum wage regulation on economic growth using the standard two‐sector model. The paper shows, inter alia. that the minimum wage regulation (if it is effective) always lowers the rate of growth by inducing over‐capitalization in the economy, and that a minimum wage poor which is sufficiently high causes the economy to decay continually. A diagrammatical exposition of some of the results is also provided.

Suggested Citation

  • Pasquale M. Sgro & Akira Takayama, 1981. "On the Long‐Run Growth Effects of a Minimum Wage for a Two‐Sector Economy," The Economic Record, The Economic Society of Australia, vol. 57(2), pages 180-185, June.
    • Handle: RePEc:bla:ecorec:v:57:y:1981:i:2:p:180-185
    DOI: 10.1111/j.1475-4932.1981.tb01049.x
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    References listed on IDEAS

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    1. Britto, Ronald, 1973. "Some Recent Developments in the Theory of Economic Growth: An Interpretation," Journal of Economic Literature, American Economic Association, vol. 11(4), pages 1343-1366, December.
    2. Richard A. Brecher, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 88(1), pages 98-116.
    3. Ronald Britto, 1973. "Some Recent Developments in the Theory of Economic Growth," UCLA Economics Working Papers 038, UCLA Department of Economics.
    4. Luigi L. Pasinetti, 1962. "Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 29(4), pages 267-279.
    5. Pasquale M. Sgro, 1978. "The Effects of Minimum Wages Legislation in Two Sector Fixed Coefficient Models," University of Western Ontario, Departmental Research Report Series 7806, University of Western Ontario, Department of Economics.
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