The Effect of Minimum Wage Legislation on Income Equality: A TheoreticalAnalysis / J. Huston McCulloch.

By:

McCulloch, J. Huston

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w0171.Publication details: Cambridge, Mass. National Bureau of Economic Research 1977.Description: 1 online resource: illustrations (black and white)Online resources:

Available additional physical forms:

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Abstract: Minimum wage legislation is frequently advocated in the belief that itcreates a more nearly equal distribution of income. A one-sector model of general equilibrium is used to analyze a universally applicable minimum wage, and a two-sector model is used to analyze a minimum wage that is only applied to certain industries. In both cases we find that a minimum wage may well lower equality (as computed by the Gini index) if we consider reasonable values for the parameters of these two models. In the absence of unemployment compensation, equality can increase only if the elasticity of substitution in production is quite low. In the one-sector case, however, equality necessarily rises if unemployment compensation is present and sufficiently generous.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w0171 (Browse shelf(Opens below))	Not For Loan

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March 1977.

Minimum wage legislation is frequently advocated in the belief that itcreates a more nearly equal distribution of income. A one-sector model of general equilibrium is used to analyze a universally applicable minimum wage, and a two-sector model is used to analyze a minimum wage that is only applied to certain industries. In both cases we find that a minimum wage may well lower equality (as computed by the Gini index) if we consider reasonable values for the parameters of these two models. In the absence of unemployment compensation, equality can increase only if the elasticity of substitution in production is quite low. In the one-sector case, however, equality necessarily rises if unemployment compensation is present and sufficiently generous.