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Minimum wage, exports and growth

  • Askenazy, Philippe

Using an endogenous growth model in an open economy, we study the impact of minimum wages on growth for an innovator country. We state that a minimum wage shifts efforts from production to R&D, but only in an open economy. Thus, it speeds up long-run growth in proportional to exports. Calibrations suggest the growth surplus can be significant. An empirical study on 11 OECD countries illustrate these results. The impact on welfare is ambiguous because the minimum wage induces unemployment. However, we show that in an open economy, a minimum wage associated with unemployment benefits can pareto dominate "laissez faire".

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 47 (2003)
Issue (Month): 1 (February)
Pages: 147-164

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Handle: RePEc:eee:eecrev:v:47:y:2003:i:1:p:147-164
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  1. Cahuc, P. & Michel, P., 1992. "Minimum Wage, Unemployment and Growth," Papiers d'Economie Mathématique et Applications 92.35, Université Panthéon-Sorbonne (Paris 1).
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