Schooling, Training, Growth and Minimum Wages

We examine how the long-run growth performance of an economy is affected by a labor market distortion. In our model, growth occurs through skill formation, and skills are generated through schooling and training of unskilled workers. We analyze how a minimum wage legislation affects long-run growth. In general, the effects are ambiguous. The reason is that while a minimum wage discourages training, it also encourages schooling. The net effect then depends on whether training or schooling dominates the long-run increases in labor productivity.
JEL classification : I 20, J 31, O 40