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National Minimum Wages, Capital Mobility and Global Economic Growth

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  • Irmen, Andreas
  • Wigger, Berthold

Abstract

How do national minimum wages affect global economic growth? We address this question in a two-country endogenous growth model with capital mobility that emphasizes a link between wages, savings and growth. We identify the conditions on technology and national preferences that determine whether national minimum wages are a stimulus or an obstacle to growth. Technology matters because it determines the functional distribution of global income as well as output effects associated with the emergence of national unemployment due to minimum wages. Interestingly, differences in national savings propensities do not only affect the strength of the growth effect associated with minimum wages but may even determine its direction.

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  • Irmen, Andreas & Wigger, Berthold, 2002. "National Minimum Wages, Capital Mobility and Global Economic Growth," CEPR Discussion Papers 3286, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3286
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Irmen, Andreas & Wigger, Berthold U., 2006. "National minimum wages, capital mobility, and global economic growth," Economics Letters, Elsevier, vol. 90(2), pages 285-289, February.
    3. Davis, Donald R., 1998. "Technology, unemployment, and relative wages in a global economy," European Economic Review, Elsevier, vol. 42(9), pages 1613-1633, November.
    4. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-494, June.
    5. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
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    Citations

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    Cited by:

    1. El-Shagi Makram, 2012. "The Distorting Impact of Capital Controls," German Economic Review, De Gruyter, vol. 13(1), pages 41-55, February.
    2. Andreas Irmen, 2009. "Frictional unemployment, labor market institutions, and endogenous economic growth," Economics Bulletin, AccessEcon, vol. 29(2), pages 1127-1138.
    3. Kazutoshi Miyazawa & Hikaru Ogawa & Toshiki Tamai, 2018. "Tax Competition and Fiscal Sustainability," CIRJE F-Series CIRJE-F-1104, CIRJE, Faculty of Economics, University of Tokyo.
    4. Sung Min Mun & Byoung Hark Yoo, 2012. "The Effects of Inter-Korean Integration Type on Economic Performance: The Role of Wage Policy," International Economic Journal, Taylor & Francis Journals, vol. 26(3), pages 447-470, September.
    5. Luciano Fanti & Luca Gori, 2011. "On economic growth and minimum wages," Journal of Economics, Springer, vol. 103(1), pages 59-82, May.
    6. Yamaguchi, Masao, 2017. "Stagnation and minimum wage: Optimal minimum wage policy in macroeconomics," MPRA Paper 80359, University Library of Munich, Germany.
    7. Miyazawa, Kazutoshi & Ogawa, Hikaru & Tamai, Toshiki, 2019. "Capital market integration and fiscal sustainability," European Economic Review, Elsevier, vol. 120(C).
    8. Irmen, Andreas & Wigger, Berthold U., 2006. "National minimum wages, capital mobility, and global economic growth," Economics Letters, Elsevier, vol. 90(2), pages 285-289, February.
    9. Tamai, Toshiki, 2022. "Tax competition versus tax coordination in a multi-region endogenous growth model with an integrated capital market," Economic Modelling, Elsevier, vol. 114(C).
    10. Stauvermann, Peter J. & Ky, Sereyvath & Nam, Gi-Yu, 2013. "The Costs of Increasing the Fertility Rate in an Endogenous Growth Model," MPRA Paper 46381, University Library of Munich, Germany.

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    More about this item

    Keywords

    capital mobility; endogenous technical change; minimum wages; unemployment;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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