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The contribution of minimum wages to increasing wage inequality

Author

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  • Coen N. Teulings

Abstract

Recent research has shown the reduction in the minimum wage to be the main cause of the rise in wage dispersion in the lower half of the wage distribution in the US during the 1980s. However, the return to human capital does not seem to have been much affected. Using new methodology this paper confirms previous conclusions regarding the wage distribution but shows that the return to human capital has also increased strongly. A 10% reduction of the minimum wage causes the wage of someone earning the previous minimum to fall by 8%: evidence in favour of a DIstance-Dependent Elasticity of Substitution (DIDES) production function. Copyright 2003 Royal Economic Society.

Suggested Citation

  • Coen N. Teulings, 2003. "The contribution of minimum wages to increasing wage inequality," Economic Journal, Royal Economic Society, vol. 113(490), pages 801-833, October.
  • Handle: RePEc:ecj:econjl:v:113:y:2003:i:490:p:801-833
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    Citations

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    Cited by:

    1. Natalya Shelkova, 2015. "Low-Wage Labor Markets and the Power of Suggestion," Review of Social Economy, Taylor & Francis Journals, vol. 73(1), pages 61-88, March.
    2. Naude, Wim & Nagler, Paula, 2015. "Industrialisation, Innovation, Inclusion," MERIT Working Papers 043, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. David H. Autor & Alan Manning & Christopher L. Smith, 2016. "The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 58-99, January.
    4. Ådne Cappelen, 2006. "Differences in Learning and Inequality," Discussion Papers 457, Statistics Norway, Research Department.
    5. Acemoglu, Daron & Autor, David, 2011. "Skills, Tasks and Technologies: Implications for Employment and Earnings," Handbook of Labor Economics, Elsevier.
    6. Robert Dur & Coen Teulings, 2003. "Are Education Subsides an Efficient Redistributive Device?," CEE Discussion Papers 0030, Centre for the Economics of Education, LSE.
    7. Pieter A. Gautier & Jose L. Moraga, 2004. "Strategic Wage Setting and Coordination Frictions with Multiple Applications," Tinbergen Institute Discussion Papers 04-063/1, Tinbergen Institute, revised 16 Aug 2004.
    8. Marco Caliendo & Alexandra Fedorets & Malte Preuss & Carsten Schröder & Linda Wittbrodt, 2017. "The Short-Term Distributional Effects of the German Minimum Wage Reform," SOEPpapers on Multidisciplinary Panel Data Research 948, DIW Berlin, The German Socio-Economic Panel (SOEP).
    9. Andrea Garnero & Stephan Kampelmann & François Rycx, 2015. "Sharp Teeth or Empty Mouths? European Institutional Diversity and the Sector-Level Minimum Wage Bite," British Journal of Industrial Relations, London School of Economics, vol. 53(4), pages 760-788, December.
    10. Klaus M. Schmidt, 2011. "Social Preferences and Competition," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 207-231, August.
    11. Heblich, Stephan, 2007. "Eigenverantwortliche Individuen und Pro-Aktive Unternehmen," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-48-07, University of Passau, Faculty of Business and Economics.
    12. Anna Lukiyanova, 2011. "Effects of Minimum Wages on the Russian Wage Distribution," HSE Working papers WP BRP 09/EC/2011, National Research University Higher School of Economics.
    13. Afonso, Óscar, 2016. "Effects of labour-market institutions on employment, wages, R&D intensity and growth in 27 OECD countries: From theory to practice," Economic Modelling, Elsevier, vol. 53(C), pages 48-62.
    14. Natalya Y. Shelkova, 2008. "Low-wage labor markets amd the power of suggestion," Working Papers 1112, Princeton University, Department of Economics, Industrial Relations Section..
    15. Kambayashi, Ryo & Kawaguchi, Daiji & Yamada, Ken, 2013. "Minimum wage in a deflationary economy: The Japanese experience, 1994–2003," Labour Economics, Elsevier, vol. 24(C), pages 264-276.
    16. Alok Kumar, 2008. "Capital Tax, Minimum Wage, and Labor Market Outcomes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 133-154, January.
    17. repec:dug:actaec:y:2017:i:6:p:267-277 is not listed on IDEAS
    18. repec:spo:wpecon:info:hdl:2441/53r60a8s3kup1vc9je5h30d2n is not listed on IDEAS
    19. Alexandros Karakitsios & Manos Matsaganis, 2018. "Minimum Wage Effects on Poverty and Inequality," DEOS Working Papers 1801, Athens University of Economics and Business.
    20. Nikutowski, Oliver, 2007. "Accelerated Technological Progress - An Explanation for Wage Dispersion and a Possible Solution to the Productivity Paradox," Discussion Papers in Economics 1925, University of Munich, Department of Economics.
    21. Rafael Lopes de Melo, 2012. "Firm Heterogeneity, Sorting and the Minimum Wage," 2012 Meeting Papers 611, Society for Economic Dynamics.
    22. Pauline Givord, 2011. "Essay on Four Issues in Public Policy Evaluation," Sciences Po publications info:hdl:2441/53r60a8s3ku, Sciences Po.
    23. repec:siu:wpaper:35-2012 is not listed on IDEAS

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