NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Effect of Minimum Wage Legislation on Income Equality: A TheoreticalAnalysis

J. Huston McCulloch

NBER Working Paper No. 171
Issued in March 1977

Minimum wage legislation is frequently advocated in the belief that itcreates a more nearly equal distribution of income. A one-sector model of general equilibrium is used to analyze a universally applicable minimum wage, and a two-sector model is used to analyze a minimum wage that is only applied to certain industries. In both cases we find that a minimum wage may well lower equality (as computed by the Gini index) if we consider reasonable values for the parameters of these two models. In the absence of unemployment compensation, equality can increase only if the elasticity of substitution in production is quite low. In the one-sector case, however, equality necessarily rises if unemployment compensation is present and sufficiently generous.

download in pdf format
   (192 K)

email paper

This paper is available as PDF (192 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w0171

Published: (Published as "The Effect of a Minimum Wage Law in the Labour-Intensive Sector") Canadian Journal of Economics, Vol. 7, no. 2 (1974): 316-318.

Users who downloaded this paper also downloaded these:
Card and Krueger w4509 Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania
Mincer w0039 Unemployment Effects of Minimum Wages
Autor, Manning, and Smith w16533 The Contribution of the Minimum Wage to U.S. Wage Inequality over Three Decades: A Reassessment
Brown, Gilroy, and Kohen w0846 The Effect of the Minimum Wage on Employment and Unemployment: A Survey
Neumark, Schweitzer, and Wascher w6536 The Effects of Minimum Wages on the Distribution of Family Incomes: A Non-Parametric Analysis
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us