Minimum Wage or Negative Income Tax: Why Skilled Workers May Favor Wage Rigidities
AbstractThis article studies the political choice over the extent and the means of income redistribution between high and low skilled workers. Redistributive tools encompass fiscal transfers with negative income tax and minimum wage. Using fiscal instruments only is assumed optimal. We show that high skilled workers may favor a second-best minimum wage requirement. This is because minimum wage increases unemployment, hence the marginal cost of redistribution is higher which gives a pretext for high skilled workers to moderate low skilled workers claim for income redistribution.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1570.
Length: 21 pages
Date of creation: Apr 2005
Date of revision:
Publication status: published as 'Minimum wage or negative income tax: why skilled workers may favor wage rigidities' in: Spanish Economic Review, 2008, 10 (1), 63-81
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Other versions of this item:
- Maya Bacache-Beauvallet & Etienne Lehmann, 2008. "Minimum wage or negative income tax: why skilled workers may favor wage rigidities," Spanish Economic Review, Springer, vol. 10(1), pages 63-81, March.
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-24 (All new papers)
- NEP-LAB-2005-04-24 (Labour Economics)
- NEP-MAC-2005-04-24 (Macroeconomics)
- NEP-PBE-2005-04-24 (Public Economics)
- NEP-POL-2005-04-24 (Positive Political Economics)
- NEP-PUB-2005-04-24 (Public Finance)
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