Sector-specific minimum wages,economic growth,and some policy implications

Economic growth is introduced in the urban unemployment model of Harris and Todaro. It is shown that in the steady state, the optimal savings ratio is greater than the golden rule savings ratio under full employment. Also the optimal proportion of total investment allocated to the urban sector is not necessarily higher than the optimal proportion under full employment.     

Age-differentiated minimum wages in developing countries

The fact that minimum wages seem especially binding for young workers has led some countries to adopt age-differentiated minimum wages. We develop a dynamic competitive two-sector labor market model where workers with heterogeneous initial skills gain productivity through experience. We compare two equally binding schemes of single and age-differentiated minimum wages, and find that although differentiated minimum wages result in a more equal distribution of income, such a scheme creates a more unequal distribution of wealth by forcing less skilled workers to remain longer in the uncovered sector. We also show that relaxing minimum wage solely for young workers reduces youth unemployment but harms the less skilled ones.     

Age-differentiated minimum wages in developing countries

The fact that minimum wages seem especially binding for young workers has led some countries to adopt age-differentiated minimum wages. We develop a dynamic competitive two-sector labor market model where workers with heterogeneous initial skills gain productivity through experience. We compare two equally binding schemes of single and age-differentiated minimum wages, and find that although differentiated minimum wages result in a more equal distribution of income, such a scheme creates a more unequal distribution of wealth by forcing less skilled workers to remain longer in the uncovered sector. We also show that relaxing minimum wage solely for young workers reduces youth unemployment but harms the less skilled ones.     

Inter- and intracountry effects of the Covid-19 pandemic on wages and economic growth

This paper aims to investigate the impact of the Covid-19 pandemic on technological knowledge, wage inequality, and economic growth, by proposing a Direct-Technical-Change model with two economies, an Innovative and other Follower. Six hypotheses are considered: (i) decrease in the unskilled-labor supply, (ii) decrease in the absolute advantage of unskilled labor, (iii) decrease in the intensity of the unskilled sector, (iv) hypothesis (i) combined with a lower decrease in the skilled-labor supply, (v) hypothesis (ii) combined with a lower decrease in the absolute advantage of skilled labor, (vi) all the variations previously considered. By comparing the steady states before and after the shock, we find an increase in the technological-knowledge bias that favors the skill-intensive sector, which positively affects the skill premium. However, in hypotheses (i) and (iv), the decrease in the relative supply of unskilled labor dominates the effect on the skill premium, which thus decreases. The economic growth rate is always penalized except for hypothesis (iii). Hypotheses (ii) and (iv) are undesirable because they increase wage inequality and penalize economic growth. Governments should support innovative activity, the engine of technological-knowledge progress, and thus economic growth, but with caution not to exacerbate the skill premium.     

Full wages,part-time employment and the minimum wage

The economic effects of the minimum wage have become increasingly ambiguous. Historically, economists have asserted that increases in the minimum wage result in increases in unemployment. This relationship has been challenged recently by Card and Krueger, Katz and Krueger, and Card. These authors have provided empirical evidence that seems to indicate that there is no relationship between various economic variables (such as level of employment, and product price, among others) and the minimum wage. In addition, these authors have not provided a cogent presentation of the effects of the minimum wage on part-time employment. This study examines, from a theoretical standpoint, the effects of the minimum wage on employment. Furthermore, we emphasize the distinction between money wages and full wages; and the role that part-time employmentplays in the analysis. After incorporating these factors into a theoretical presentation, we provide empirical evidence by way of an OLS regression. We conclude that firms respond to increases in the minimum wage by altering the level of part-time employment. By doing this, firms are able to absorb the minimum wage increase because part timers receive fewer fringe benefits.     

Employment cycles and minimum wages. A macro view

We start from the hypothesis that Goodwin’s (1967) distributive cycle does not represent a process of social reproduction that can be considered as adequate and sustainable in the long-run, due to the degradation of a part of the workforce it implies during periods of mass unemployment. Against this background, the paper then formulates an unemployment benefit system and a minimum (and maximum) wage rule for the employed where this form of economic reproduction of capitalism is overcome, at least to a certain extent. There is perfect mobility on the labor market (concerning ‘hiring’ and ‘firing’), with fluctuations of the employment rate made socially acceptable by guaranteeing minimum levels of income to all members of the workforce. We can show in this framework that minimum (and maximum) real wages provide increased stability to the economy by reducing the amount of overshooting in income distribution as well as the employment rate.     

The impact of health sector on R&D,economic growth and wages

We extend the existing R&D growth literature by focusing on the short-, medium-, long-run effects of the health sector on R&D intensity, economic growth and wages, and by considering 21 OECD countries between 1991 and 2008. We show that: (i) there is a unique and stable steady state; (ii) an increase in health-labour share in skilled population has no effect on growth, but affects negatively (positively) the R&D intensity (the skill premium); (iii) Anglo–Saxons countries have the lowest health-labour share in skilled-labour population, and Nordic countries have the lowest skill premium and the highest consumption/production of healthcare per capita.     

On economic growth and development

The paper offers a subjectivist approach to economic growth and an institutional view of development. In particular, the term development regards the prevailing rules of the game and their effects on the key variables for economic activity to take off: property rights and productive entrepreneurship. And growth is deemed to be the result of favourable institutional environments where chances are exploited and individuals succeed in improving their living conditions. Methodological and normative investigation questions the validity of the recent and increasing literature on institutional design, where institutional economics actually plays only a modest role. JEL Codes B53, O10     

The heterogeneous regional effects of minimum wages in Poland

We evaluate the impact of large minimum wage hikes on employment and wage growth in Poland between 2004 and 2018. We estimate panel data models utilizing the considerable variation in wage levels, and in minimum wage bites, across 73 Polish NUTS 3 regions. We find that minimum wage hikes had a significant positive effect on wage growth and a significant negative effect on employment growth only in regions of Poland that were in the first tercile of the regional wage distribution in 2007. These effects were moderate in size, and appear to be more relevant for wages. Specifically, if the ratio of minimum wage to average wage had remained constant after 2007, by 2018, the average wages in these regions would have been 3.2% lower, while employment would have been 1.2% higher. In the remaining two-thirds of Polish regions, we find no significant effects of minimum wage hikes on average wages or on employment.     

The impact of minimum wages and foreign domestic workers in Taiwan

The purpose of setting the minimum wage is mainly to protect the rights and interests of vulnerable workers and to enhance productivity of labour. In this paper, an attempt has been made to explore the effect of the upwards adjustment of the minimum wage in Taiwan on the inflation rate, the unemployment rate, labour productivity, economic growth and other macroeconomic variables by means of an analysis of empirical data using a structural vector auto‐regressive model. The findings of the paper show that upwards adjustment of the minimum wage in Taiwan will not intensify the unemployment rate. On the contrary, it will help to promote labour productivity to an extent that will have a positive effect on the economic growth rate. In addition, this paper investigates, long‐term care system should incorporate the foreign domestic worker labour pool, which could provide the additional personnel necessary for the nation's long‐term care. Minimum wage should apply to foreign domestic workers, and foreign domestic workers should not be treated as a separate group of workers in minimum wage policy.     

The impact of minimum wages on youth employment in Portugal

On January 1, 1987, the legal minimum wage for workers aged 18 and 19 in Portugal was raised by 49.3%. This shock is used as a “natural experiment” to evaluate the impact of the minimum wage change on teenagers’ employment. The method is to compare, based on firm-level microdata, the employment growth of 18-19-year-old workers with employment growth of older workers. The main findings are that the increase in the minimum wage significantly reduced employment of 18 and olds, but increased employment of 20- olds.     

Effects of collective minimum wages on youth employment in Austria

This paper analyzes the impact of collective minimum wages on youth employment for 14 sectors of the Austrian economy, taking into account the possibility of nonlinearity. We find that when the real index of minimum wage rises above a certain point, negative employment effects for young individuals (aged between 19 and 25 years) can be expected in Austria. In five of seven market sectors the minimum wage lies above the optimal level that maximizes the employment of young workers.     

Union effects on wages and wage growth

This paper employs a pooled cross-section time-series error-variance-components model applied to panel data to present new estimates of the impact of unions on earnings profiles. It avoids union-status measurement errors alluded to by Freeman (1984) contained in current panel estimates by limiting analysis to a set of one-time union status switches for which union status data could be sufficiently cross-checked. It avoids heterogeneity biases by comparing entire earnings profiles for given workers before and after their union status change. Finally, potential selectivity biases in using a non-random sample of only union switchers, is found not to plague the reported results.     

Dealing with monopsony power: Employment subsidies vs. minimum wages

We show in a monopsony model that accounting for changes in hours a minimum wage has ambiguous effects on employment and welfare. When all workers have the same preference ordering over leisure and consumption employment subsidies unambiguously improve welfare. Many countries have minimum wages and also tax minimum wage workers.     

The effects of minimum wages on the health of working teenagers

This article examines the effect of minimum wage increases on the self-reported health of teenage workers. We use a difference-in-differences estimation strategy and data from the Current Population Survey, and disaggregate the sample by race/ethnicity and gender to uncover the differential effects of changes in the minimum wage on health. We find that white women are more likely to report better health with a minimum wage increase while Hispanic men report worse health.     

On the nonlinear relationship between inflation and economic growth

Using a large panel data set from both developed and developing economies and employing the PSTR and dynamic GMM techniques, this study highlights two aspects of the inflation–growth relationship. First, it analyzes the nonlinearity of the relationship and identifies several thresholds for the global sample and for various income-specific sub-samples. Second, it identifies some country-based macroeconomic features that influence this nonlinearity. Our empirical results substantiate both views and validate the fact that inflation–growth nonlinearity is sensitive to a country׳s level of financial development, capital accumulation, trade openness and government expenditures. Moreover, these country-specific characteristics result in some marked differences in this nonlinear relationship.     

The impact of minimum wages on employment of low‐wage workers

This study provides empirical evidence on the impact of a minimum wage increase on employment of workers in the formal sector who have wages below the minimum level in Vietnam. Using the difference‐in‐differences with propensity score matching and the Vietnam Household Living Standard Surveys of 2004 and 2006, the article finds that the minimum wage increase in 2005 reduced the proportion of workers having a formal sector job among low‐wage workers. Most workers who lost formal sector jobs became self‐employed.     

Population growth and economic growth

This discussion of the issues relating to the problem posed by population explosion in the developing countries and economic growth in the contemporary world covers the following: predictions of economic and social trends; the Malthusian theory of population; the classical or stationary theory of population; the medical triage model; ecological disaster; the Global 2000 study; the limits to growth; critiques of the Limits to Growth model; nonrenewable resources; food and agriculture; population explosion and stabilization; space and ocean colonization; and the limits perspective. The Limits to Growth model, a general equilibrium anti-growth model, is the gloomiest economic model ever constructed. None of the doomsday models, the Malthusian theory, the classical stationary state, the neo-Malthusian medical triage model, the Global 2000 study, are so far reaching in their consequences. The course of events that followed the publication of the "Limits to Growth" in 1972 in the form of 2 oil shocks, food shock, pollution shock, and price shock seemed to bear out formally the gloomy predictions of the thesis with a remarkable speed. The 12 years of economic experience and the knowledge of resource trends postulate that even if the economic pressures visualized by the model are at work they are neither far reaching nor so drastic. Appropriate action can solve them. There are several limitations to the Limits to Growth model. The central theme of the model, which is overshoot and collapse, is unlikely to be the course of events. The model is too aggregative to be realistic. It exaggerates the ecological disaster arising out of the exponential growth of population and industry. The gross underestimation of renewable resources is a basic flaw of the model. The most critical weakness of the model is its gross underestimation of the historical trend of technological progress and the technological possiblities within industry and agriculture. The model does correctly emphasize the exponential growth of population as the source of several complications for economic growth and human welfare. Stabilization of population by reducing fertility is conducive for improving the quality of population and also advances the longterm management of the population growth and work force utilization. The perspective of longterm economic management involves populatio n planning, control of environmental pollution, conservation of scarce resources, exploration of resources, realization of technological possibilities in agriculture and industry and in farm and factory, and achievement of economic growth and its equitable distribution.