Minimum wages, human capital, employment and growth

Christian Ragacs

Publication: Working/Discussion PaperWU Working Paper


This paper deals with the effects of minimum wages on human capital accumulation, and steady state employment and growth. The minimum wage is introduced in a model of endogenous growth driven by human capital accumulation. Unemployed agents maximize utility given the information that they are unemployed facing changed budget constraints. This situation is implemented in a "non-market-clearing equilibrium" framework. We show that the steady state rate of growth is not affected by the minimum wage and that in the steady state the system yields full employment. These effects are generated by intertemporal adjustments of the employed households who re-act to the relatively higher minimum wage which increases skills accumulation.

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SeriesDepartment of Economics Working Paper Series

WU Working Paper Series

  • Department of Economics Working Paper Series

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