IDEAS home Printed from https://ideas.repec.org/p/red/sed006/345.html
   My bibliography  Save this paper

Capital Tax and Minimum Wage: Implications for the Dispersion of Wages

Author

Listed:
  • Alok Kumar

    (Economics University of Victoria)

Abstract

This paper analyzes the general equilibrium effects of capital tax when there is a mandated minimum wage. The analysis is conducted in an inter-temporal search model in which firms post wages as in Burdett and Mortensen (1998). A(binding) minimum wage provides alower support for the distribution of wages. A decrease in capital tax leads to an increase in wage dispersion. In contrast, when the minimum wage is not binding, a lower capital tax reduces the dispersion in wages. A binding minimum wage also magnifies the positive effects of a lower capital tax on labor supply, employment, and output. The analysis suggests that a policy change which involves an increase in minimum wage and a fall in capital tax such that unemployment rate remains constant reduces dispersion of wages

Suggested Citation

  • Alok Kumar, 2006. "Capital Tax and Minimum Wage: Implications for the Dispersion of Wages," 2006 Meeting Papers 345, Society for Economic Dynamics.
  • Handle: RePEc:red:sed006:345
    as

    Download full text from publisher

    File URL: http://web.uvic.ca/~kumara/red2.pdf
    File Function: main text
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Labor market search; capital tax; minimum wage; labor supply; wage dispersion; wage posting; general equilibrium;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed006:345. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.