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On economic growth and minimum wages

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  • Luciano Fanti
  • Luca Gori

Abstract

We offer an analysis of the existence of a positive relationship between minimum wages and economic growth in a fairly standard general equilibrium, one-sector, two-period overlapping generations model, where the usual Romer-typed knowledge spill-over mechanism in production represents the engine of endogenous growth. It is shown that - contrary to the conventional view which has failed to pay due attention to dynamic contexts with labour market rigidities - the minimum-wage economy may grow faster than the competitive-wage economy in spite of a reduced employment rate and, in particular, a growth-maximising minimum wage does exist. A straightforward message is therefore that policymakers may appropriately use minimum wage policies to promote economic growth and individuals' welfare.
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  • Luciano Fanti & Luca Gori, 2011. "On economic growth and minimum wages," Journal of Economics, Springer, vol. 103(1), pages 59-82, May.
    • Handle: RePEc:kap:jeczfn:v:103:y:2011:i:1:p:59-82
    DOI: 10.1007/s00712-011-0190-3
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    3. Dr. Nickolaos Giovanis, 2018. "Determining Factors of Minimum Wage in the Member States of the OECD," Sumerianz Journal of Business Management and Marketing, Sumerianz Publication, vol. 1(4), pages 93-101, 12-2018.
    4. Watanabe, Minoru & Miyake, Yusuke & Yasuoka, Masaya, 2018. "Unemployment, Income Growth and Social Security," MPRA Paper 86155, University Library of Munich, Germany.
    5. Obeng, Samuel Kwabena, 2015. "An empirical analysis of the relationship between minimum wage, investment and economic growth in Ghana," MPRA Paper 65674, University Library of Munich, Germany.
    6. Jellal, Mohamed, 2014. "Diaspora transferts et réduction du chômage [Diaspora remittances and reduction of unemployment]," MPRA Paper 58114, University Library of Munich, Germany.
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    9. Luca Gori, 2009. "Endogenous fertility, family policy and multiple equilibria," Discussion Papers 2009/79, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    10. Tomás Gómez Rodríguez & Humberto Ríos Bolívar & Ali Aali Bujari, 2018. "Salario eficiente y crecimiento económico para el caso de América Latina. (Efficient wages and Economic Growth in Latin America)," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 213-235, October.
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    12. Dr. Nickolaos Giovanis, 2019. "“Determining Factors of Minimum Wage in the Member States of the OECDâ€," Sumerianz Journal of Business Management and Marketing, Sumerianz Publication, vol. 2(1), pages 6-14, 01-2019.
    13. Obeng, Samuel Kwabena, 2015. "An Empirical Analysis of the Relationship between Minimum Wage, Investment and Economic Growth in Ghana," African Journal of Economic Review, African Journal of Economic Review, vol. 3(2), July.
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    More about this item

    Keywords

    Endogenous growth; Minimum wage; Unemployment; OLG model; H24; J60; O41;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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    Access and download statistics

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