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Minimum wage, exports and growth

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  • Askenazy, Philippe

Abstract

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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Suggested Citation

  • Askenazy, Philippe, 2003. "Minimum wage, exports and growth," European Economic Review, Elsevier, vol. 47(1), pages 147-164, February.
  • Handle: RePEc:eee:eecrev:v:47:y:2003:i:1:p:147-164
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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Cahuc, Pierre & Michel, Philippe, 1996. "Minimum wage unemployment and growth," European Economic Review, Elsevier, vol. 40(7), pages 1463-1482, August.
    3. John M. Abowd & Francis Kramarz & Thomas Lemieux & David N. Margolis, 2000. "Minimum Wages and Youth Employment in France and the United States," NBER Chapters,in: Youth Employment and Joblessness in Advanced Countries, pages 427-472 National Bureau of Economic Research, Inc.
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    12. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
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    15. David S. Lee, 1999. "Wage Inequality in the United States During the 1980s: Rising Dispersion or Falling Minimum Wage?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 977-1023.
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    Citations

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    Cited by:

    1. Gorostiaga Alonso, Miren Arantzazu & Rubio-Ramírez, Juan F., 2004. "Optimal Minimum Wage in a Competitive Economy: an Alternative Modelling Approach," DFAEII Working Papers 2004-07, University of the Basque Country - Department of Foundations of Economic Analysis II.
    2. N. Bauduin & N. Chusseau & J. Hellier, 2008. "Combining minimum wage and exchange rate policy to release the external constraint on growth," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(3), pages 299-320.
    3. Mohd Zaini Abd Karim & Sok-Gee Chan & Sallahuddin Hassan, 2016. "Minimum Wage Policy and Country’s Technical Efficiency," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1729-1735.
    4. Arantza Gorostiaga & Juan Francisco Rubio-Ramírez, 2004. "Optimal minimum wage in a competitive economy," FRB Atlanta Working Paper 2004-30, Federal Reserve Bank of Atlanta.
    5. Mo, Pak Hung, 2011. "Minimum Wage Legislation and Economic Growth: Channels and Effects," MPRA Paper 35820, University Library of Munich, Germany.
    6. Joël Hellier & Nathalie Chusseau, 2010. "Globalization and the Inequality-Unemployment Tradeoff," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 1028-1043, November.
    7. repec:spr:envpol:v:20:y:2018:i:1:d:10.1007_s10018-016-0180-3 is not listed on IDEAS
    8. Luciano Fanti & Luca Gori, 2011. "On economic growth and minimum wages," Journal of Economics, Springer, vol. 103(1), pages 59-82, May.
    9. George Economides & Thomas Moutos, 2017. "Minimum Wages in the Presence of In-Kind Redistribution," CESifo Working Paper Series 6545, CESifo Group Munich.
    10. George Economides & Thomas Moutos, 2014. "Minimum Wages as a Redistributive Device in the Long Run," CESifo Working Paper Series 5052, CESifo Group Munich.
    11. Michaël Bonnal, 2010. "Economic Growth and Labor Standards: Evidence from a Dynamic Panel Data Model," Review of Development Economics, Wiley Blackwell, vol. 14(1), pages 20-33, February.
    12. Joseph J. Sabia, 2015. "Do minimum wages stimulate productivity and growth?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 221-221, December.
    13. Gorostiaga, Arantza & Rubio-Ramirez, Juan F., 2007. "Optimal minimum wage in a competitive economy: An alternative modelling approach," Economic Modelling, Elsevier, vol. 24(5), pages 778-796, September.

    More about this item

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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