A Politico-Economic Analysis of Minimum Wages and Wage Subsidies
In this paper we construct a political economy model in which minimum wages are determined according to the wishes of the median voter. Using the minimum wage scheme as the status quo, we show that the replacement of minimum wages by wage subsidies guaranteeing the same (pre-tax) level of income (achieved by the government supplementing the wage income of workers by a subsidy equal to the difference between the competitive wage rate and the minimum wage rate), is not likely to receive political support unless it is supplemented by increased taxation of profits (after-tax profits are also likely to increase). Moreover, we show that the likelihood of implementation of wage subsidies is undermined by the existence of a heterogeneous labour force.
|Date of creation:||2006|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Juan J. Dolado & Florentino Felgueroso & Juan F. Jimeno, 2000.
"The Role of the Minimum Wage in the Welfare State: An Appraisal,"
Swiss Journal of Economics and Statistics (SJES),
Swiss Society of Economics and Statistics (SSES), vol. 136(III), pages 223-245, September.
- Dolado, Juan J. & Felgueroso, Florentino & Jimeno, Juan F., 2000. "The Role of the Minimum Wage in the Welfare State: An Appraisal," IZA Discussion Papers 152, Institute for the Study of Labor (IZA).
- Dolado, Juan J. & Felgueroso, Florentino & Jimeno, Juan F, 2000. "The Role Of The Minimum Wage In The Welfare State: An Appraisal," CEPR Discussion Papers 2452, C.E.P.R. Discussion Papers.
- Juan J. Dolado & Florentino Felgueroso & Juan F. Jimeno, "undated". "The Role of the Minimum Wage in the Welfare State: An Appraisal," Working Papers 2000-12, FEDEA.
- Cox, James C & Oaxaca, Ronald L, 1982. "The Political Economy of Minimum Wage Legislation," Economic Inquiry, Western Economic Association International, vol. 20(4), pages 533-555, October.
- Andreas Knabe, 2009. "Marginal wage subsidies: a rent-extracting instrument for employment creation," Journal of Economic Studies, Emerald Group Publishing, vol. 36(4), pages 393-410, September.
- Neumark, David & Wascher, William, 2007.
"Minimum Wages and Employment,"
IZA Discussion Papers
2570, Institute for the Study of Labor (IZA).
- Andreas Knabe & Ronnie Schöb & Joachim Weimann, 2006. "Marginal Employment Subsidization: A New Concept and a Reappraisal," CESifo Working Paper Series 1707, CESifo Group Munich.
- Adam, Antonis & Moutos, Thomas, 2006. "Minimum wages, inequality and unemployment," Economics Letters, Elsevier, vol. 92(2), pages 170-176, August.
- James M. Poterba, 1999.
"The Rate of Return to Corporate Capital and Factor Shares: New EstimatesUsing Revised National Income Accounts and Capital Stock Data,"
NBER Working Papers
6263, National Bureau of Economic Research, Inc.
- Poterba, James M., 1998. "The rate of return to corporate capital and factor shares: new estimates using revised national income accounts and capital stock data," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 211-246, June.
- Alberto Alesina & Dani Rodrik, 1991.
"Distributive Politics and Economic Growth,"
NBER Working Papers
3668, National Bureau of Economic Research, Inc.
- Henry C. Simons, 1944. "Some Reflections on Syndicalism," Journal of Political Economy, University of Chicago Press, vol. 52, pages 1-1.
- Phelps, Edmund S, 1994. "Low-Wage Employment Subsidies versus the Welfare State," American Economic Review, American Economic Association, vol. 84(2), pages 54-58, May.
- Pinelopi Koujianou Goldberg & Giovanni Maggi, 1997.
"Protection for Sale: An Empirical Investigation,"
NBER Working Papers
5942, National Bureau of Economic Research, Inc.
- J. Michael Orszag & Dennis J. Shower, 2000. "The Effectiveness of Employment Vouchers: A Simple Approach," German Economic Review, Verein für Socialpolitik, vol. 1(4), pages 385-419, November.
- Orszag, J. Michael & Snower, Dennis J., 2003. "Designing employment subsidies," Labour Economics, Elsevier, vol. 10(5), pages 557-572, October.
- Saint-Paul, Gilles, 2000. "The Political Economy of Labour Market Institutions," OUP Catalogue, Oxford University Press, number 9780198293323, December.
- Sinn, Hans-Werner, 2000.
"The threat to the German welfare state,"
Munich Reprints in Economics
19861, University of Munich, Department of Economics.
- Ronnie Schöb und Joachim Weimann & Joachim Weimann, 2003. "Kombilohn: Die Magdeburger Alternative," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 4(1), pages 1-17, 02.
- Hans-Werner Sinn, 2005. "Migration and Social Replacement Incomes: How to Protect Low-Income Workers in the Industrialized Countries Against the Forces of Globalization and Market Integration," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 375-393, August.
- Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-649, May.
- Orszag, Jonathan Michael & Snower, Dennis J., 2000. "The effectiveness of employment vouchers: a simple approach," Open Access Publications from Kiel Institute for the World Economy 2519, Kiel Institute for the World Economy (IfW).
- Kishore Gawande & Usree Bandyopadhyay, 2000. "Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 139-152, February.
- Hans-Werner Sinn, 2000. "The threat to the German welfare state," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 28(3), pages 279-294, September.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_1810. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe)
If references are entirely missing, you can add them using this form.