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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. John M. Abowd & Francis Kramarz & Thomas Lemieux & David N. Margolis, 2000. "Minimum Wages and Youth Employment in France and the United States," NBER Chapters, in: Youth Employment and Joblessness in Advanced Countries, pages 427-472 National Bureau of Economic Research, Inc.
  2. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  3. repec:oup:qjecon:v:114:y:1999:i:3:p:977-1023 is not listed on IDEAS
  4. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, 04.
  5. Romer, Paul M., 1990. "Human capital and growth: Theory and evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 251-286, January.
  6. 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.
  7. Garcia-Penalosa, Cecilia & Aghion, Philippe & Caroli, Eve, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Economics Papers from University Paris Dauphine 123456789/10091, Paris Dauphine University.
  8. Rivera-Batiz, Luis A. & Romer, Paul M., 1991. "International trade with endogenous technological change," European Economic Review, Elsevier, vol. 35(4), pages 971-1001, May.
  9. Cahuc, P. & Michel, P., 1992. "Minimum Wage, Unemployment and Growth," Papiers d'Economie Mathématique et Applications 92.35, Université Panthéon-Sorbonne (Paris 1).
  10. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  11. Xavier Sala-i-Martin, 1997. "I just ran four million regressions," Economics Working Papers 201, Department of Economics and Business, Universitat Pompeu Fabra.
  12. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  13. Persson, Torsten & Tabellini, Guido, 1992. "Growth, distribution and politics," European Economic Review, Elsevier, vol. 36(2-3), pages 593-602, April.
  14. repec:oup:qjecon:v:107:y:1992:i:2:p:407-37 is not listed on IDEAS
  15. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, December.
  16. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  17. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  18. 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.
  19. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  20. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
  21. Paul M. Romer, 1987. "Crazy Explanations for the Productivity Slowdown," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 163-210 National Bureau of Economic Research, Inc.
  22. Robert G. Valletta, 1996. "The minimum wage," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue oct11.
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