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The Minimum Wage and Inequality: The Effects of Education and Technology

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  • Zsofia Barany

    (Département d'économie)

Abstract

In the last 30 years wage inequality increased steeply while real minimum wages fell. In this paper I demonstrate that a general equilibrium model with endogenous skill choice is required to correctly evaluate the implications of minimum wage changes. The minimum wage not only truncates the wage distribution, but also affects skill prices and therefore changes the incentives that people face when making educational decisions. The calibrated model suggests, in line with recent empirical literature, that even though minimum wages affect the bottom end of the wage distribution more, their impact on the top end is significant as well.

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  • Zsofia Barany, 2016. "The Minimum Wage and Inequality: The Effects of Education and Technology," Sciences Po publications info:hdl:2441/4jgjdlef848, Sciences Po.
  • Handle: RePEc:spo:wpmain:info:hdl:2441/4jgjdlef848r49dq2dv8go26r7
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    4. Charles M. Beach, 2016. "Changing income inequality: A distributional paradigm for Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(4), pages 1229-1292, November.

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    More about this item

    Keywords

    Minimum Wage; Education; Technology; Wage Inequality;
    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
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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