Fiscal Policy and Minimum Wage for Redistribution: An Equivalence Result

Arantza Gorostiaga and Juan Francisco Rubio-Ramírez
Working Paper 2005-8
May 2005

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In this paper, we derive conditions under which a minimum-wage law combined with anonymous taxes and transfers and an agent-specific tax-transfer scheme are equivalent policies.

JEL classification: E62, H21

Key words: redistribution policy, minimum wage, tax-transfer scheme, equivalence result

Financial support from Fundación Ramón Areces and 9/UPV 00035.321-13511/2001 is acknowledged. The views expressed here are the authors’ and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors’ responsibility.

Please address questions regarding content to Arantza Gorostiaga, Universidad del País Vasco, Avenida Lehendakari Aguirre, 83, 48015 Bilbao (Spain), +34 94 601 38 14,, or Juan Franciso Rubio-Ramírez, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, NE, Atlanta, GA 30309, 404-498-8057,