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On the Long‐Run Growth Effects of a Minimum Wage for a Two‐Sector Economy *
Author(s) -
SGRO PASQUALE M.,
TAKAYAMA AKIRA
Publication year - 1981
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1981.tb01049.x
Subject(s) - minimum wage , economics , capitalization , wage , exposition (narrative) , efficiency wage , labour economics , informal sector , market economy , art , linguistics , philosophy , literature
This paper investigates the effect of (nationally enforced) minimum wage regulation on economic growth using the standard two‐sector model. The paper shows, inter alia. that the minimum wage regulation (if it is effective) always lowers the rate of growth by inducing over‐capitalization in the economy, and that a minimum wage poor which is sufficiently high causes the economy to decay continually. A diagrammatical exposition of some of the results is also provided.