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Author: | Boadway, R. Cuff, K. |
Title: | A minimum wage can be welfare-improving and employment-enhancing |
Journal: | European Economic Review
2001 : MAR, VOL. 45:3, p. 553-576 |
Index terms: | MINIMUM WAGE INCOME TAX UNEMPLOYMENT |
Language: | eng |
Abstract: | The authors examine whether minimum wages can fulfill a useful role as part of an optimal tax-transfer scheme. The government cannot observe household abilities, only their incomes, and is constrained to ensure that those working are at least as well-off as those not working. A minimum wage combined with the institutional features of typical welfare systems allows the incentive constraint to be severed at the ability level associated with the minimum wage. If such a scheme can be enforced, the government can increase the amount of redistribution from those working to those not working, and possibly lower the number of unemployed. |
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