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Deserving Poor and the Desirability of Minimum Wage Rules

  • Tomer Blumkin
  • Leif Danziger

In this paper we provide a novel justification for the use of minimum wage rules to supplement the optimal tax-and-transfer system. We demonstrate that if labor supply decisions are concentrated along the intensive margin and employment is efficiently rationed, a minimum wage rule can be socially beneficial by serving as a tagging device that targets benefits to the deserving poor, defined as low-skilled workers exhibiting a weak taste for leisure.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4721.

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Date of creation: 2014
Date of revision:
Handle: RePEc:ces:ceswps:_4721
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  1. Rebitzer, James B. & Taylor, Lowell J., 1995. "The consequences of minimum wage laws Some new theoretical ideas," Journal of Public Economics, Elsevier, vol. 56(2), pages 245-255, February.
  2. Hungerbühler, Mathias & Lehmann, Etienne, 2007. "On the Optimality of a Minimum Wage: New Insights from Optimal Tax Theory," IZA Discussion Papers 2957, Institute for the Study of Labor (IZA).
  3. Lee, David & Saez, Emmanuel, 2012. "Optimal minimum wage policy in competitive labor markets," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 739-749.
  4. Lang, Kevin, 1987. "Pareto Improving Minimum Wage Laws," Economic Inquiry, Western Economic Association International, vol. 25(1), pages 145-58, January.
  5. Katherine Cuff, 1998. "Optimality of Workfare with Heterogeneous Preferences," Working Papers 968, Queen's University, Department of Economics.
  6. Fong, Christina, 2001. "Social preferences, self-interest, and the demand for redistribution," Journal of Public Economics, Elsevier, vol. 82(2), pages 225-246, November.
  7. Cahuc, P. & Saint-Martin, A. & Zylberberg, A., 2001. "The consequences of the minimum wage when other wages are bargained over," European Economic Review, Elsevier, vol. 45(2), pages 337-352, February.
  8. repec:oup:qjecon:v:117:y:2002:i:3:p:1039-1073 is not listed on IDEAS
  9. repec:oup:qjecon:v:102:y:1987:i:3:p:477-89 is not listed on IDEAS
  10. repec:oup:restud:v:38:y:1971:i:114:p:175-208 is not listed on IDEAS
  11. Besley, T. & Coate, S., 1990. "Understanding Welfare Stigma: Taxpayer Resentment And Statistical Discrimination," Papers 42, Princeton, Woodrow Wilson School - Discussion Paper.
  12. Guesnerie, Roger & Roberts, Kevin, 1987. "Minimum wage legislation as a second best policy," European Economic Review, Elsevier, vol. 31(1-2), pages 490-498.
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