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Taxes, Redistribution, and the Minimum Wage: A Theoretical Analysis

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  • Stephen P. Allen

Abstract

This paper considers a simple general equilibrium model that contains two types of workers with differing levels of ability and a social-welfare-maximizing government. The paper shows that social welfare can sometimes be increased by supplementing an optimal linear income tax with a minimum wage, but that social welfare can never be increased by supplementing an optimal nonlinear income tax with a minimum wage.

Suggested Citation

  • 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.
    • Handle: RePEc:oup:qjecon:v:102:y:1987:i:3:p:477-489.
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