The optimal graduated minimum wage and social welfare

Eliav Danziger, Leif Danziger

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

2 Scopus citations

Abstract

This chapter analyzes the effects of introducing a graduated minimum wage in a model with optimal income taxation in which a government seeks to maximize social welfare. It shows that the optimal graduated minimum wage increases social welfare by increasing the low-productivity workers’ consumption and bringing it closer to the first-best. The chapter also describes how the graduated minimum wage in a social welfare optimum depends on important economy characteristics such as the government’s revenue needs, the social welfare weight of low-productivity workers, and the numbers and productivities of the different types of workers.

Original languageEnglish
Title of host publicationResearch in Labor Economics
PublisherEmerald Group Publishing Ltd.
Pages55-72
Number of pages18
DOIs
StatePublished - 1 Jan 2018

Publication series

NameResearch in Labor Economics
Volume46
ISSN (Print)0147-9121

Keywords

  • Graduated minimum wage
  • Optimal income taxation
  • Social welfare

ASJC Scopus subject areas

  • Industrial relations
  • Economics and Econometrics
  • Political Science and International Relations

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