The Optimum Minimum Wage When Labor Services are Taxed
AbstractWe consider an economy (e.g. Chile 1973-83) with a minimum wage sector and a free sector, and a tax on labor earnings. The supply of labor depends positively on the wage. Jobs in the minimum wage sector are allocated by lottery. In such a model a minimum wage may increase employment and output by drawing additional workers into employment. Without taxation the utility of increased output is more than balanced by the utility of decreased leisure. But in the presence of output or labor taxation, that is not necessarily the case. We use GAMS to find the optimum minimum wage for various parameter values.
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Bibliographic InfoPaper provided by Duke University, Department of Economics in its series Working Papers with number 96-13.
Date of creation: 1996
Date of revision:
Publication status: Published in REVISTA INTERNAZIONALE DI SCIENZE ECONOMISCHE E COMMERCIALI, Vol. XLV, 1998, pages 209-217
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Web page: http://econ.duke.edu/
Find related papers by JEL classification:
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
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