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A politico-economic analysis of minimum wages and wage subsidies

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  • Adam, Antonis
  • Moutos, Thomas

Abstract

This paper constructs a political economy model in which minimum wages are determined according to majority voting. Using the minimum wage scheme as the status quo, we show that the replacement of minimum wages by wage subsidies is not likely to receive political support unless it is supplemented by increased taxation of profits (after-tax profits are also likely to increase).

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File URL: http://www.sciencedirect.com/science/article/B6V84-51KT878-2/2/f5d4ecc55143fb1b7cf8950e19ca0c36
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 110 (2011)
Issue (Month): 3 (March)
Pages: 171-173

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Handle: RePEc:eee:ecolet:v:110:y:2011:i:3:p:171-173

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Web page: http://www.elsevier.com/locate/ecolet

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Keywords: Minimum wages Wage subsidies Majority voting Political economy;

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References

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  1. Phelps, Edmund S, 1994. "Low-Wage Employment Subsidies versus the Welfare State," American Economic Review, American Economic Association, vol. 84(2), pages 54-58, May.
  2. James M. Poterba, 1999. "The Rate of Return to Corporate Capital and Factor Shares: New EstimatesUsing Revised National Income Accounts and Capital Stock Data," NBER Working Papers 6263, National Bureau of Economic Research, Inc.
  3. Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, vol. 89(5), pages 1135-1155, December.
  4. Henry C. Simons, 1944. "Some Reflections on Syndicalism," Journal of Political Economy, University of Chicago Press, vol. 52, pages 1.
  5. Juan J. Dolado & Florentino Felgueroso & Juan F. Jimeno, . "The Role of the Minimum Wage in the Welfare State: An Appraisal," Working Papers 2000-12, FEDEA.
  6. Sinn, Hans-Werner, 2000. "The threat to the German welfare state," Munich Reprints in Economics 19861, University of Munich, Department of Economics.
  7. Andreas Knabe & Ronnie Schöb & Joachim Weimann, 2006. "Marginal Employment Subsidization: A New Concept and a Reappraisal," CESifo Working Paper Series 1707, CESifo Group Munich.
  8. Hans-Werner Sinn, 2004. "Migration and Social Replacement Incomes: How to Protect Low-Income Workers in the Industrialized Countries Against the Forces of Globalization and Market Integration," CESifo Working Paper Series 1265, CESifo Group Munich.
  9. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-49, May.
  10. Saint-Paul, Gilles, 2000. "The Political Economy of Labour Market Institutions," OUP Catalogue, Oxford University Press, number 9780198293323.
  11. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  12. Adam, Antonis & Moutos, Thomas, 2006. "Minimum wages, inequality and unemployment," Economics Letters, Elsevier, vol. 92(2), pages 170-176, August.
  13. Orszag, Jonathan Michael & Snower, Dennis J., 2000. "The effectiveness of employment vouchers : a simple approach," Open Access Publications from Kiel Institute for the World Economy 2519, Kiel Institute for the World Economy (IfW).
  14. Orszag, J. Michael & Snower, Dennis J., 2003. "Designing employment subsidies," Labour Economics, Elsevier, vol. 10(5), pages 557-572, October.
  15. Ronnie Schöb und Joachim Weimann & Joachim Weimann, 2003. "Kombilohn: Die Magdeburger Alternative," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 4(1), pages 1-17, 02.
  16. Neumark, David & Wascher, William L., 2007. "Minimum Wages and Employment," Foundations and Trends(R) in Microeconomics, now publishers, vol. 3(1–2), pages 1-182, March.
  17. Cox, James C & Oaxaca, Ronald L, 1982. "The Political Economy of Minimum Wage Legislation," Economic Inquiry, Western Economic Association International, vol. 20(4), pages 533-55, October.
  18. J. Michael Orszag & Dennis J. Shower, 2000. "The Effectiveness of Employment Vouchers: A Simple Approach," German Economic Review, Verein für Socialpolitik, vol. 1(4), pages 385-419, November.
  19. Kishore Gawande & Usree Bandyopadhyay, 2000. "Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 139-152, February.
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Cited by:
  1. George Economides & Thomas Moutos, 2014. "Minimum Wages, Capital Accumulation and Worker's Incomes," CESifo Working Paper Series 4821, CESifo Group Munich.

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