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A case for maximum wage

Author

Listed:
  • Blumkin, Tomer
  • Sadka, Efraim
  • Shem-Tov, Yotam

Abstract

In this paper we demonstrate that supplementing the optimal non-linear income tax system with a binding maximum wage rule attains a Pareto improvement, by serving to mitigate the mimicking incentives of the high-skill individuals without entailing distortions.

Suggested Citation

  • Blumkin, Tomer & Sadka, Efraim & Shem-Tov, Yotam, 2013. "A case for maximum wage," Economics Letters, Elsevier, vol. 120(3), pages 374-378.
    • Handle: RePEc:eee:ecolet:v:120:y:2013:i:3:p:374-378
    DOI: 10.1016/j.econlet.2013.05.004
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    References listed on IDEAS

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    1. Blumkin, Tomer & Margalioth, Yoram & Sadka, Efraim, 2007. "Anti-discrimination rules versus income taxation in the pursuit of horizontal equity," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1167-1176, June.
    2. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
    3. Lee, David & Saez, Emmanuel, 2012. "Optimal minimum wage policy in competitive labor markets," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 739-749.
    4. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 175-208.
    5. Stephen P. Allen, 1987. "Taxes, Redistribution, and the Minimum Wage: A Theoretical Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(3), pages 477-489.
    6. Balcer, Yves & Sadka, Efraim, 1982. "Horizontal equity, income taxation and self-selection with an application to income tax credits," Journal of Public Economics, Elsevier, vol. 19(3), pages 291-309, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. François, Martin & Mertens de Wilmars, Sybille & Maréchal, Kevin, 2023. "Unlocking the potential of income and wealth caps in post-growth transformation: A framework for improving policy design," Ecological Economics, Elsevier, vol. 208(C).
    2. Sovacool, Benjamin K., 2022. "A perspective on treaties, maximum wages, and carbon currencies: Innovative policy instruments for global decarbonization," Energy Policy, Elsevier, vol. 160(C).

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    More about this item

    Keywords

    Redistribution; Maximum wage; Optimal income tax;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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