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On economic growth and minimum wages

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  • Luciano Fanti

    ()

  • Luca Gori

    ()

Abstract

We offer an analysis of the existence of a positive relationship between minimum wages and economic growth in a fairly standard general equilibrium, one-sector, two-period overlapping generations model, where the usual Romer-typed knowledge spill-over mechanism in production represents the engine of endogenous growth. It is shown that – contrary to the conventional view which has failed to pay due attention to dynamic contexts with labour market rigidities – the minimum-wage economy may grow faster than the competitive-wage economy in spite of a reduced employment rate and, in particular, a growth-maximising minimum wage does exist. A straightforward message is therefore that policymakers may appropriately use minimum wage policies to promote economic growth and individuals’ welfare.

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Bibliographic Info

Article provided by Springer in its journal Journal of Economics.

Volume (Year): 103 (2011)
Issue (Month): 1 (May)
Pages: 59-82

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Handle: RePEc:kap:jeczfn:v:103:y:2011:i:1:p:59-82

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Web page: http://www.springerlink.com/link.asp?id=108909

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Keywords: Endogenous growth; Minimum wage; Unemployment; OLG model; H24; J60; O41;

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Cited by:
  1. Luciano Fanti & Luca Gori, 2009. "Endogenous lifetime in an overlapping generations small open economy," Discussion Papers 2009/92, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  2. Luciano Fanti & Luca Gori, 2009. "Endogenous fertility, endogenous lifetime and economic growth: the role of health and child policies," Discussion Papers 2009/91, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  3. Manuela Gussoni - Andrea Mangani, 2009. "The impact of public funding for innovation on firms' R&D investments: Do R&D cooperation and appropriability matter?," Discussion Papers 2009/90, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  4. Luca Gori, 2009. "Endogenous fertility, family policy and multiple equilibria," Discussion Papers 2009/79, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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