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The Redistributive Role of Minimum Wage Legislation and Unemployment Insurance

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  • Nicolas Marceau
  • Robin Boadway

Abstract

The use of unemployment insurance and minimum wages as instruments for redistributing income are analyzed. The government is assumed to be able to implement an optimal income tax in an economy consisting of two ability-types of persons. The effect of introducing a minimum wage which induces involuntary unemployment combined with unemployment insurance is considered. Social welfare can be improved despite the possible revenue costs to the government if the policy causes a self-selection constraint to be weakened by enough. Sufficiency conditions are derived for this to be the case.

Suggested Citation

  • Nicolas Marceau & Robin Boadway, 1991. "The Redistributive Role of Minimum Wage Legislation and Unemployment Insurance," Working Papers 805, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:805
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    File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_805.pdf
    File Function: First version 1991
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    Cited by:

    1. Christian Arnsperger & David Croix, 1996. "Envy-minimizing unemployment benefits," Review of Economic Design, Springer;Society for Economic Design, vol. 2(1), pages 119-146, December.

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