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Publications [#239159] of Edward Tower

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Journal Articles

  1. Gokcekus, O; Tower, E, An Efficiency Enhancing Minimum Wage, vol. 7 no. 2 (Spring, 2003), pp. 22pp. [html]
    (last updated on 2019/07/18)

    Abstract:
    We consider an economy (e.g., Chile 1973-83 or modern Turkey) with a minimum wage sector and a free sector, and a tax on labor earnings. We ask “Can a slightly binding minimum wage simultaneously raise tax revenue, employment, and economic efficiency?” We answer “Yes, if the elasticity of demand for labor in the free sector exceeds the elasticity of demand in the minimum-wage sector.” The logical key is that the minimum wage draws high reservation- wage workers into the labor force, who give up untaxed leisure in exchange for taxed work and thereby increase revenue, employment and efficiency.


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