IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/0171.html
   My bibliography  Save this paper

The Effect of Minimum Wage Legislation on Income Equality: A TheoreticalAnalysis

Author

Listed:
  • J. Huston McCulloch

Abstract

Minimum wage legislation is frequently advocated in the belief that itcreates a more nearly equal distribution of income. A one-sector model of general equilibrium is used to analyze a universally applicable minimum wage, and a two-sector model is used to analyze a minimum wage that is only applied to certain industries. In both cases we find that a minimum wage may well lower equality (as computed by the Gini index) if we consider reasonable values for the parameters of these two models. In the absence of unemployment compensation, equality can increase only if the elasticity of substitution in production is quite low. In the one-sector case, however, equality necessarily rises if unemployment compensation is present and sufficiently generous.

Suggested Citation

  • J. Huston McCulloch, 1977. "The Effect of Minimum Wage Legislation on Income Equality: A TheoreticalAnalysis," NBER Working Papers 0171, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0171
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w0171.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Harry G. Johnson, 1969. "Minimum Wage Laws: A General Equilibrium Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 2(4), pages 599-604, November.
    2. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215-215.
    3. Harry G. Johnson & Peter Mieszkowski, 1970. "The Effects of Unionization on the Distribution of Income: A General Equilibrium Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 84(4), pages 539-561.
    4. Moore, Thomas Gale, 1971. "The Effect of Minimum Wages on Teenage Unemployment Rates," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 897-902, July-Aug..
    5. Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 87-104, August.
    6. Lillard, Lee A, 1977. "Inequality: Earnings vs. Human Wealth," American Economic Review, American Economic Association, vol. 67(2), pages 42-53, March.
    7. J. Huston McCulloch, 1974. "The Effect of a Minimum Wage Law in the Labour-Intensive Sector," Canadian Journal of Economics, Canadian Economics Association, vol. 7(2), pages 317-319, May.
    8. Kosters, Marvin & Welch, Finis, 1972. "The Effects of Minimum Wages on the Distribution of Changes in Aggregate Employment," American Economic Review, American Economic Association, vol. 62(3), pages 323-332, June.
    9. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557-557.
    10. Albert Zucker, 1973. "Minimum Wages and the Long-Run Elasticity of Demand for Low-Wage Labor," The Quarterly Journal of Economics, Oxford University Press, vol. 87(2), pages 267-277.
    11. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0171. 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: () or (Joanne Lustig). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.