IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

On economic growth and minimum wages

  • Fanti, Luciano
  • Gori, Luca

We offer an analysis of the existence of a positive relationship between minimum wages and economic growth in a simple one-sector overlapping generations economy where the usual Romer-typed knowledge spill-over mechanism in production represents the engine of endogenous growth, in the case of both homogeneous and heterogeneous (i.e., skilled and unskilled) labour. Assuming also the existence of unemployment benefits financed with consumption taxes not conditioned on age at a balanced budget, it is shown that minimum wages may stimulate economic growth and welfare despite the unemployment occurrence. Moreover, a growth-maximising minimum wage can exist. A straightforward message, therefore, is that a combination of minimum wage and unemployment benefit policies can appropriately be used to promote balanced growth and welfare.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://mpra.ub.uni-muenchen.de/25842/1/MPRA_paper_25842.pdf
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25842.

as
in new window

Length:
Date of creation: 12 Oct 2010
Date of revision:
Handle: RePEc:pra:mprapa:25842
Contact details of provider: Postal:
Ludwigstraße 33, D-80539 Munich, Germany

Phone: +49-(0)89-2180-2459
Fax: +49-(0)89-2180-992459
Web page: https://mpra.ub.uni-muenchen.de

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Marco Guerrazzi, 2004. "Intertemporal Preferences, Distributive Shares, and Local Dynamics," Discussion Papers 2004/49, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  2. Francine D. Blau & Lawrence M. Kahn, 1994. "International Differences in Male Wage Inequality: Institutions versus Market Forces," NBER Working Papers 4678, National Bureau of Economic Research, Inc.
  3. Toshiki Tamai, 2009. "Inequality, unemployment, and endogenous growth in a political economy with a minimum wage," Journal of Economics, Springer, vol. 97(3), pages 217-232, July.
  4. Hellwig, Martin F & Irmen, Andreas, 2001. "Wage Growth, Productivity Growth, and the Evolution of Employment," CEPR Discussion Papers 2927, C.E.P.R. Discussion Papers.
  5. Robert Shimer & Ivan Werning, 2006. "Reservation Wages and Unemployment Insurance," NBER Working Papers 12618, National Bureau of Economic Research, Inc.
  6. Hipolito, Simon, 2008. "International Differences in Wage Inequality: A New Glance with European Matched Employer-Employee Data," MPRA Paper 7932, University Library of Munich, Germany.
  7. Luciano fanti & Luca Spataro, 2004. "Dynamic inefficiency, public debt and endogenous fertility," Discussion Papers 2004/38, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  8. Luciano Fanti & Luca Spataro, 2007. "Economic Growth and Welfare in a Simple Neoclassical OLG Model with Minimum Wage and Consumption Taxes support," Discussion Papers 2007/67, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  9. Askenazy, Philippe, 2003. "Minimum wage, exports and growth," European Economic Review, Elsevier, vol. 47(1), pages 147-164, February.
  10. Aghion, Philippe & Howitt, Peter, 1991. "Growth and Unemployment," CEPR Discussion Papers 577, C.E.P.R. Discussion Papers.
  11. Maurizio Lisciandra, 2007. "The Role of Reciprocating Behaviour in Contract Choice," Discussion Papers 2007/65, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  12. Nidardo, J. & Fortin, N. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Papers 93-94-15, California Irvine - School of Social Sciences.
  13. Uhlig, Harald & Yanagawa, Noriyuki, 1996. "Increasing the capital income tax may lead to faster growth," European Economic Review, Elsevier, vol. 40(8), pages 1521-1540, November.
  14. Andrea Mario Lavezzi, 2003. "Complex Dyanmics in a Simple Model of Economic Specialization," Computing in Economics and Finance 2003 170, Society for Computational Economics.
  15. Alga Foschi, 2005. "Lo shipping, la cantieristica ed i porti nellindustria marittima," Discussion Papers 2005/53, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  16. Luciano Fanti & Luca Spataro, 2008. "Poverty traps and intergenerational transfers," International Tax and Public Finance, Springer, vol. 15(6), pages 693-711, December.
  17. Fanti, Luciano & Gori, Luca, 2010. "Child policy solutions for the unemployment problem," Economics Letters, Elsevier, vol. 109(3), pages 147-149, December.
  18. Falk, Armin & Fehr, Ernst & Zehnder, Christian, 2005. "The Behavioural Effects of Minimum Wages," CEPR Discussion Papers 5115, C.E.P.R. Discussion Papers.
  19. Gaetano Alfredo Minerva, 2004. "How Do Cost (or Demand) Asymmetries and Competitive Pressure Shape Trade Patterns and Location?," Discussion Papers 2004/40, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  20. Tamara Fioroni, 2006. "Life Expectancy, Health Spending and Saving," Discussion Papers 2006/62, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  21. Mario Morroni, 2006. "Complementarities among capability, transaction and scale-scope considerations in determining organisational boundaries," Discussion Papers 2006/58, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  22. Chris Papageorgiou & John Duffy & Fidel Perez-Sebastian, . "Capital-Skill complementarity? Evidence from a Panel of Countries," Departmental Working Papers 2003-012, Department of Economics, Louisiana State University.
  23. Fabrizio Bulckaen & Marco Stampini, 2004. "Commodity Tax Reforms In A Many Consumers Economy: A Viable Decision-Making Procedure," Discussion Papers 2004/44, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  24. Alga D. Foschi & Xavier Peraldi & Michel Rombaldi, 2005. "Inter-island Links in Mediterranean Short Sea Shipping Networks," Discussion Papers 2005/52, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  25. Acemoglu, Daron & Zilibotti, Fabrizio, 2000. "Productivity Differences," CEPR Discussion Papers 2498, C.E.P.R. Discussion Papers.
  26. Neumark, David & Wascher, William, 1995. "Minimum-Wage Effects on School and Work Transitions of Teenagers," American Economic Review, American Economic Association, vol. 85(2), pages 244-49, May.
  27. 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.
  28. Tommaso Luzzati & Alessandro Franco, 2004. "Idrogeno, fonti rinnovabili ed eco-efficienza. Quale approccio alla questione energetica?," Discussion Papers 2004/45, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  29. Luciano Fanti & Luca Spataro, 2004. "Endogenous labor supply and Diamond's (1965) model: a reconsideration of the debt role," Discussion Papers 2003/22, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  30. Irmen, Andreas & Wigger, Berthold, 2001. "Trade Union Objectives and Economic Growth," CEPR Discussion Papers 3027, C.E.P.R. Discussion Papers.
  31. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, 04.
  32. Alga Foschi, . "The maritime container transport structure in the mediterranean and italy," Discussion Papers 2003/24, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  33. Blanchard, Olivier, 1998. "Revisiting European Unemployment : Unemployment, Capital Accumulation and Factor Prices," Research Series, Economic and Social Research Institute (ESRI), number GLS28.
  34. Ravn, Morten O & Sorensen, Jan Rose, 1999. " Schooling, Training, Growth and Minimum Wages," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(3), pages 441-57, September.
  35. Jappelli, Tullio & Padula, Mario, 2007. "Households' saving and debt in Italy," CFS Working Paper Series 2007/30, Center for Financial Studies (CFS).
  36. Alga Foschi, 2004. "A cost-transit time choice model: monomodality vs. intermodality," Discussion Papers 2004/47, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  37. Carlo Brambilla & Giandomenico Piluso, 2008. "Italian investment and merchant banking up to 1914: Hybridising international models and practices," Discussion Papers 2008/7, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  38. David Neumark & William Wascher, 2006. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," NBER Working Papers 12663, National Bureau of Economic Research, Inc.
  39. Luciano fanti & Luca Spataro, 2004. "Welfare implications of national debt in a OLG model with endogenous fertility," Discussion Papers 2004/35, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  40. Davide Fiaschi & Andrea Mario Lavezzi, 2003. "Nonlinear Economic Growth: Some Theory and Cross-Country Evidence," Discussion Papers 2003/14, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  41. Claudia Goldin & Lawrence F. Katz, 2007. "Long-Run Changes in the Wage Structure: Narrowing, Widening, Polarizing," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 38(2), pages 135-168.
  42. Kraay, Aart & Raddatz, Claudio, 2005. "Poverty traps, aid, and growth," Policy Research Working Paper Series 3631, The World Bank.
  43. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  44. Cahuc, P. & Michel, P., 1992. "Minimum Wage, Unemployment and Growth," Papiers d'Economie Mathématique et Applications 92.35, Université Panthéon-Sorbonne (Paris 1).
  45. Luciano Fanti & Luca Gori, 2008. "Neoclassical Economic Growth and Lifetime Welfare in a Simple OLG Model with Unions," Discussion Papers 2008/71, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  46. Irmen, Andreas & Wigger, Berthold, 2002. "National Minimum Wages, Capital Mobility and Global Economic Growth," CEPR Discussion Papers 3286, C.E.P.R. Discussion Papers.
  47. Luciano Fanti & Luca Gori, 2008. "‘Backyard’ technology and regulated wages in a neoclassical OLG growth model," Discussion Papers 2008/74, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  48. Nicola Meccheri, 2004. "Wages Behaviour and Unemployment in Keynes and New Keynesians Views. A Comparison," Discussion Papers 2004/41, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  49. Lorenzo Corsini, 2006. "Firms' Entry, Imperfect Competition and Regulation," Discussion Papers 2006/57, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  50. Thomas Lindh & Bo Malmberg, 1999. "Age structure effects and growth in the OECD, 1950-1990," Journal of Population Economics, Springer;European Society for Population Economics, vol. 12(3), pages 431-449.
  51. Bertola, Giuseppe, 1996. "Factor shares in OLG models of growth," European Economic Review, Elsevier, vol. 40(8), pages 1541-1560, November.
  52. Alga Foschi, 2004. "The coast port industry in the USA: a key factor in the process of economic growth," Discussion Papers 2004/46, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  53. Nicola Meccheri, 2003. "Performance-related-pay nel pubblico impiego: un'analisi economica," Discussion Papers 2003/3, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  54. Luciano Fanti & Luca Gori, 2008. "Fertility and regulated wages in an OLG model of neoclassical growth: Pensions and old age support," Discussion Papers 2008/70, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  55. Meccheri, Nicola, 2009. "A note on noncompetes, bargaining and training by firms," Economics Letters, Elsevier, vol. 102(3), pages 198-200, March.
  56. Marco Guerrazzi, 2005. "Notes on Continuous Dynamic Models: the Benhabib-Farmer Condition for Indeterminacy," Discussion Papers 2005/54, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  57. Gaetano Alfredo Minerva, . "Location and Horizontal Differentiation under Duopoly with Marshallian Externalities," Discussion Papers 2003/10, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  58. David Card & Alan B. Krueger, 1993. "Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania," NBER Working Papers 4509, National Bureau of Economic Research, Inc.
  59. Stefan Josten, 2006. "Dynamic fiscal policies and unemployment in a simple endogenous growth model," International Tax and Public Finance, Springer, vol. 13(6), pages 701-716, November.
  60. Meckl, Jurgen, 2004. "Accumulation of technological knowledge, wage differentials, and unemployment," Journal of Macroeconomics, Elsevier, vol. 26(1), pages 65-82, March.
  61. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, December.
  62. Davide Fiaschi, 2003. "Fiscal policy and welfare in an endogenous growth model with heterogeneous endowments," Discussion Papers 2003/18, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  63. Luciano Fanti & Luca Gori, 2009. "Longevity, fertility and PAYG pension systems sustainability," Discussion Papers 2009/77, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  64. Giuseppe Freni & Fausto Gozzi & Neri Salvadori, 2004. "Existence of Optimal Strategies in linear Multisector Models," Discussion Papers 2004/29, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  65. Mario Morroni, 2006. "Innovative activity, substantive uncertainty and the theory of the firm," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, vol. 2006(3), pages 47-75.
  66. Pierre Cahuc & Cette Gilbert & André Zylberberg, 2008. "Salaire minimum et bas revenus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00638149, HAL.
  67. repec:lsu:lsuwpp:2003-12 is not listed on IDEAS
  68. Lorenzo Corsini & Marco Guerrazzi, 2004. "Searching for Long Run Equilibrium Relationships in the Italian Labour Market: a Cointegrated VAR Approach," Discussion Papers 2004/43, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  69. Davide Fiaschi & Pier Mario Pacini, 2003. "Growth and coalition formation," Discussion Papers 2003/13, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  70. Mariti Paolo, 2004. "Costi di transazione e sviluppi dell'economia d'impresa," L'industria, Società editrice il Mulino, issue 4, pages 755-782.
  71. Lorenzo Corsini & Elisabetta Olivieri, 2008. "Technological Change and the Wage Differential between Skilled and Unskilled Workers: Evidence from Italy," Discussion Papers 2008/73, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  72. Claudia Goldin & Lawrence F. Katz, 2007. "Long-Run Changes in the U.S. Wage Structure: Narrowing, Widening, Polarizing," NBER Working Papers 13568, National Bureau of Economic Research, Inc.
  73. Davide Fiaschi & Andrea Mario Lavezzi, . "On the Determinants of Growth Volatility: a Nonparametric Approach," Discussion Papers 2003/25, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  74. Robert E. Lipsey & Irving B. Kravis & Romualdo A. Roldan, 1978. "Do Multinational Firms Adapt Factor Proportions To Relative Factor Prices?," NBER Working Papers 0293, National Bureau of Economic Research, Inc.
  75. Alga Foschi, 2004. "Politiques communautaires de soutien au short sea shipping (SSS)," Discussion Papers 2004/48, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  76. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
  77. Alga D. Foschi, 2006. "La concentrazione industriale per i sistemi di trasporto sostenibile," Discussion Papers 2006/64, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  78. Tetsuo Ono, 2007. "Unemployment dynamics in an OLG economy with public pensions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(3), pages 549-577, December.
  79. Corneo, Giacomo & Marquardt, Marko, 2000. "Public pensions, unemployment insurance, and growth," Journal of Public Economics, Elsevier, vol. 75(2), pages 293-311, February.
  80. Akos Dombi, 2006. "Scale Effects in Idea-Based Growth Models: a Critical Survey," Discussion Papers 2006/60, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  81. Nicole M. Fortin & Thomas Lemieux, 1997. "Institutional Changes and Rising Wage Inequality: Is There a Linkage?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 75-96, Spring.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:25842. 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: (Joachim Winter)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.