Minimum Wage Legislation and Unemployment Insurance as Instruments for Redistribution

Marceau, Nicolas; Boadway, Robin

doi:10.2307/3440667

Cited by 74 publications

(75 citation statements)

References 9 publications

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“…Finally, from equation (17), the high-skilled consumer budget constraint (18) and the government budget constraint (5) we get equation (8):…”

Section: Discussionmentioning

confidence: 99%

“…Marceau and Boadway (1994) …nd su¢ cient conditions for a minimum wage being welfare improving when it is combined with unemployment bene…ts in an economy with informational asymmetries. In Boadway and Cahuc (2001), it is proven that, under private information, non-linear taxes and a minimum wage might increase welfare when typical features of the welfare system are assumed.…”

Section: Introductionmentioning

confidence: 99%

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Optimal Minimum Wage in a Competitive Economy

Gorostiaga

Rubio-Ramı́rez

2005

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: This paper studies the use of a minimum wage law to implement the optimal redistribution policy when a distorting tax-transfer scheme is also available. The authors build a static general equilibrium model with a Ramsey planner making decisions on taxes, transfers, and minimum wage levels. Workers are assumed to differ only in their productivity. The authors find that optimal redistribution may imply the use of only taxes and transfers, only a minimum wage, or the proper combination of both policies. The key factor driving their results is the reaction of the demand for low-skilled labor to the minimum wage law. Hence, an optimal minimum wage appears to be most likely when low-skilled households are scarce, the complementarity between the two types of workers is large, or the difference in productivity is small. JEL classification: H21 and E62 Terms of use: Documents in EconStor may

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“…Finally, from equation (17), the high-skilled consumer budget constraint (18) and the government budget constraint (5) we get equation (8):…”

Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Optimal Minimum Wage in a Competitive Economy

Gorostiaga

Rubio-Ramı́rez

2005

SSRN Journal

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“…Using this framework, Allen (1987) and Guesnerie and Roberts (1987) find that a binding minimum wage is undesirable if the government could set nonlinear income taxes. 4 While they only consider underemployment on the labor-hours margin, Marceau and Boadway (1994) extend these analyses by considering involuntary unemployment on the extensive margin. They find that a minimum wage can only be a desirable policy if the unemployed receive smaller transfers than the low-skilled employed.…”

Section: Earlier Literaturementioning

confidence: 99%

Is a Minimum Wage an Appropriate Instrument for Redistribution?

Gerritsen

Jacobs

2016

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We analyze the redistributional (dis)advantages of a minimum wage over income taxation in competitive labor markets, without imposing assumptions on the (in)efficiency of labor rationing. Compared to a distributionally equivalent tax change, a minimum-wage increase raises involuntary unemployment, but also raises skill formation as some individuals avoid unemployment. A minimum wage is an appropriate instrument for redistribution if and only if the public revenue gains from additional skill formation outweigh both the public revenue losses from additional unemployment and the utility losses of inefficient labor rationing. We show that this critically depends on how labor rationing is distributed among workers. A necessary condition for the desirability of a minimum-wage increase is that the public revenue gains from higher skill formation outweigh the revenue losses from higher unemployment. We write this condition in terms of measurable sufficient statistics. Our empirical analysis suggests that a minimum-wage increase is undesirable in nearly all OECD countries. A reduction in the minimum wage, along with tax adjustments that keep net incomes constant, would yield a Pareto improvement. Terms of use: Documents inJEL: D61; H21; J21; J24; J38

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“…Marceau and Boadway (1994) …nd su¢ cient conditions for a minimum wage being welfare improving when it is combined with unemployment bene…ts in an economy with informational asymmetries. In Boadway and Cu¤ (2001), it is proven that, under private information, non-linear taxes and a minimum wage might increase welfare when typical features of the welfare system are assumed.…”

Section: Introductionmentioning

confidence: 98%