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Fiscal policy and minimum wage for redistribution: an equivalence result
In this paper, we derive conditions under which a minimum-wage law combined with anonymous taxes and transfers and an agent-specific tax-transfer scheme are equivalent policies.
Optimal minimum wage in a competitive economy
This paper studies the use of a minimum wage law to implement the optimal redistribution policy when a distorting tax-transfer scheme is also available. The authors build a static general equilibrium model with a Ramsey planner making decisions on taxes, transfers, and minimum wage levels. Workers are assumed to differ only in their productivity. The authors find that optimal redistribution may imply the use of only taxes and transfers, only a minimum wage, or the proper combination of both policies. The key factor driving their results is the reaction of the demand for low-skilled labor to ...