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Lobbying For Minimum Wages

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  • Josip Lesica

Abstract

Using a common agency lobbying framework, this paper illustrates how the minimum wage set reflects the interaction between economic and political factors and under what circumstances will the policymaker be induced, through lobbying, to change the minimum wage. Specifically, when the labor demand elasticity is large, lobbying is successful in inducing the policymaker to set the minimum wage in accordance with her political ideology. However, the paper also shows the conditions under which lobbying will reverse the ideological preference and induce a business‐friendly government to increase the minimum wage. Empirical analysis on a panel data for ten Canadian provinces gives considerable support for theoretical predictions. The real minimum wage decreases in skill‐adjusted union density and political ideology, while larger labor demand elasticity reinforces the influence of political ideology in the presence of lobbying. (JEL J38, D72, D78)

Suggested Citation

  • Josip Lesica, 2018. "Lobbying For Minimum Wages," Economic Inquiry, Western Economic Association International, vol. 56(4), pages 2027-2057, October.
    • Handle: RePEc:bla:ecinqu:v:56:y:2018:i:4:p:2027-2057
    DOI: 10.1111/ecin.12692
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    More about this item

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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