Vol. 5 No. 10 (2010)

Artículos

The effects of a minimum wage in a dsge model: an extension of the bénassy model

Published 2010-01-04

  • Eva-Maria Heberer

Eva-Maria Heberer
Institute of Public Economics at the School of Business

Abstract

Economic analyses discussing minimum wages find ambiguous results. The theory mostly predicts a negative effect for the economy, whereas other studies even find positive effects. This work implements a minimum wage in the well known framework by Bénassy (1995ª) in both nominal and real terms. Calibration of the model supports the traditional findings: A minimum wage lowers the overall output which cannot be compensated by a positive technology shock. Consumption and investment decline if output does. Thus, the economy as a whole is hurt by a minimum wage.

Keywords

Minimum wages, labor market, business cycles

PDF (Spanish)

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