The Optimal Minimum Wage for Poverty Minimization Goto, Hideaki

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Goto, Hideaki
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Bulletin of Economic Research
Industrial productivity; Business, general; Minimum wage
To authenticate to the full-text of this article, please visit this link: Byline: Hideaki Goto (*) Keywords: inequality; labour market competitiveness; minimum wages; poverty; productivity Abstract: ABSTRACT This paper characterizes the poverty minimizing minimum wage, and shows how it varies as productivity, inequality and market competitiveness change. We show that the optimal minimum wage is equal to the competitive wage only in special cases. In general, the former is higher than the latter. Thus, poverty minimization does not coincide with employment maximization. We also show that the optimal minimum wage always rises with productivity and, under certain conditions, falls with competitiveness and inequality. Furthermore, the higher the competitiveness and inequality, the more the optimal wage rises with productivity. Author Affiliation: (*)National Graduate Institute for Policy Studies, Minato-ku, Tokyo, Japan Article note: Correspondence: National Graduate Institute for Policy Studies, 7-22-1 Roppongi, Minato-ku, Tokyo 106-8677, Japan. Tel.: +81-3-6439-6213; Fax: +81-3-6439-6010; Email: I am most grateful to Ravi Kanbur and Nancy Chau for many discussions and insightful comments, which had a significant influence on the paper. I would also like to thank Kaushik Basu, Gary Fields, and two anonymous referees for helpful comments and suggestions that helped me greatly improve the paper. The usual disclaimer applies.
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