Deserving Poor and the Desirability of a Minimum Wage

45 Pages Posted: 6 Sep 2014

See all articles by Tomer Blumkin

Tomer Blumkin

Tel Aviv University - Eitan Berglas School of Economics; Ben-Gurion University of the Negev - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Leif Danziger

Ben-Gurion University of the Negev - Department of Economics; IZA Institute of Labor Economics

Abstract

This paper provides a novel justification for using a minimum wage to supplement an optimal tax-and-transfer system. We demonstrate that if labor supply decisions are concentrated along the intensive margin and employment is efficiently rationed, a minimum wage can be socially beneficial by serving as a screening device that targets benefits to the deserving poor. We also show that with a minimum wage in place, a negative marginal tax rate may not be optimal.

Keywords: deserving poor, minimum wage, redistribution, efficient rationing, negative marginal tax rate

JEL Classification: D6, H2, H5

Suggested Citation

Blumkin, Tomer and Danziger, Leif, Deserving Poor and the Desirability of a Minimum Wage. IZA Discussion Paper No. 8418, Available at SSRN: https://ssrn.com/abstract=2492445

Tomer Blumkin (Contact Author)

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
+972 8 647 2268 (Phone)
+972 8 647 2941 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Leif Danziger

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
8-6472295 (Phone)
8-6472941 (Fax)

HOME PAGE: http://www.econ.bgu.ac.il/facultym/danziger/main.htm

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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