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Minimum wage, exports and growth

  • Askenazy, Philippe

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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Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Couverture Orange) with number 0109.

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Length: 25 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:cpm:cepmap:0109
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  1. Acemoglu, D. & Pischke, J.S., 1997. "The Structure of Wages and Investment in General Training," Working papers 97-24, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. 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.
  3. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
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  7. Cahuc, Pierre & Michel, Philippe, 1996. "Minimum wage unemployment and growth," European Economic Review, Elsevier, vol. 40(7), pages 1463-1482, August.
  8. van Schaik, A.B.T.M. & de Groot, H.L.F., 1997. "Productivity and Unemployment in a Two-country Model with Endogenous Growth," Discussion Paper 1997-53, Tilburg University, Center for Economic Research.
  9. Aghion, Philippe & Caroli, Eve & García-Peñalosa, Cecilia, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Scholarly Articles 12502063, Harvard University Department of Economics.
  10. John M. Abowd & Francis Kramarz & Thomas Lemieux & David Margolis, 2000. "Minimum Wages and Youth Employment in France and the United States," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00354400, HAL.
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  12. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
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  18. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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