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Incidence Analysis of a Sector-Specific Minimum Wage in a Two-Sector Harris-Todaro Model

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  • M. Hasan Imam
  • John Whalley

Abstract

In this paper we explore the incidence of a sector-specific minimum wage in a two-sector Harris-Todaro model with intersectorally mobile capital. In addition to the output and substitution effects in Harberger's tax incidence analysis, an additional effect reflecting the endogenously generated unemployment arises in the Harris-Todaro case. We also explore the functional incidence issue numerically for Mexico by using general equilibrium computational techniques. In a number of the calculations reported, capital more than bears the income loss from unemployment caused by the sector-specific minimum wage.

Suggested Citation

  • M. Hasan Imam & John Whalley, 1985. "Incidence Analysis of a Sector-Specific Minimum Wage in a Two-Sector Harris-Todaro Model," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 207-224.
  • Handle: RePEc:oup:qjecon:v:100:y:1985:i:1:p:207-224.
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    File URL: http://hdl.handle.net/10.2307/1885742
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    Cited by:

    1. Vassilis Rapanos, 2006. "Tax Incidence in a Model with Efficiency Wages and Unemployment," International Economic Journal, Taylor & Francis Journals, vol. 20(4), pages 477-494.
    2. Mathan Satchi & Jonathan Temple, 2006. "Growth and labour markets in developing countries," CEDI Discussion Paper Series 06-12, Centre for Economic Development and Institutions(CEDI), Brunel University.
    3. Shah, Anwar & Whalley, John, 1990. "An alternative view of tax incidence analysis for developing countries," Policy Research Working Paper Series 462, The World Bank.
    4. Mathan Satchi & Jonathan Temple, 2009. "Labor Markets and Productivity in Developing Countries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 183-204, January.
    5. Kul Bhatia, 2001. "Specific and mobile capital, migration and unemployment in a Harris-Todaro model," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 11(2), pages 207-222.
    6. Vassilis T. Rapanos, 2004. "Minimum Wage And Income Distribution In Developing Countries," International Trade 0404005, EconWPA.
    7. Arief Anshory Yusuf, 2005. "Who Pay for the Cleaner Air? Distributional Impact of Environmental Policy in a Dualistic Economy," Working Papers in Economics and Development Studies (WoPEDS) 200502, Department of Economics, Padjadjaran University, revised Feb 2005.

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