IDEAS home Printed from https://ideas.repec.org/p/red/sed004/302.html
   My bibliography  Save this paper

Optimal Minimum Wage

Author

Listed:
  • Arantza Gorostiaga
  • Juan F Rubio-Ramirez

Abstract

This paper studies the optimality of a minimum wage law when it is used, jointly with a distortionary tax-transfer scheme, to redistribute income among agents with different marginal productivity. We build a dynamic and stochastic general equilibrium model with a Ramsey planner making decisions on distortionary taxes, transfers, debt and minimum wage levels. In the economy there are two types of households; a low skilled and a high skilled type. We find that the optimality of minimum wages depends on the elasticity of substitution between labor inputs in the production technology and the size of each group in the total population. The sign and size of the elasticity of labor supply play also a crucial role in the setting of optimal policies. Finally, when it is assumed that tax revenues finance not only transfers, but also public spending, the probability of an optimal minimum wage law increase

Suggested Citation

  • Arantza Gorostiaga & Juan F Rubio-Ramirez, 2004. "Optimal Minimum Wage," 2004 Meeting Papers 302, Society for Economic Dynamics.
    • Handle: RePEc:red:sed004:302
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Arantza Gorostiaga & Rubio-Ramírez Juan F., 2008. "Fiscal policy and minimum wage for redistribution: an equivalence result," Economics Bulletin, AccessEcon, vol. 5(11), pages 1-8.
    2. Larrain, Mauricio & Poblete, Joaquin, 2007. "Age-differentiated minimum wages in developing countries," Journal of Development Economics, Elsevier, vol. 84(2), pages 777-797, November.

    More about this item

    Keywords

    Ramsey Problem; Minimun Wage; Redistribution;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed004:302. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.