Wage Rigidity or Fiscal Redistribution: The credibility Issue
AbstractWe show that lack of commitment in the policymaking process may explain the prevalence of the minimum wage to redistribute income, despite its negative impact on unemployment. In the absence of commitment, firms anticipate the government's willingness to use a minimum wage policy to reduce the tax collecting costs implied by fiscal transfers. This expectation leads to a reduction in the labor demand that generates unemployment.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 32 (2012)
Issue (Month): 4 ()
Contact details of provider:
Unemployment; Inequality; Wage Rigidity; Credibility; Time Inconsistency;
Find related papers by JEL classification:
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hungerbühler, Mathias & Lehmann, Etienne, 2009.
"On the optimality of a minimum wage: New insights from optimal tax theory,"
Journal of Public Economics,
Elsevier, vol. 93(3-4), pages 464-481, April.
- Hungerbühler, Mathias & Lehmann, Etienne, 2007. "On the Optimality of a Minimum Wage: New Insights from Optimal Tax Theory," IZA Discussion Papers 2957, Institute for the Study of Labor (IZA).
- Mathis Hungerbühler & Etienne Lehmann, 2007. "On the Optimality of a Minimum Wage : New Insights from Optimal Tax Theory”," Working Papers 2007-17, Centre de Recherche en Economie et Statistique.
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