On the Long‐Run Growth Effects of a Minimum Wage for a Two‐Sector Economy

This paper investigates the effect of (nationally enforced) minimum wage regulation on economic growth using the standard two‐sector model. The paper shows, inter alia. that the minimum wage regulation (if it is effective) always lowers the rate of growth by inducing over‐capitalization in the economy, and that a minimum wage poor which is sufficiently high causes the economy to decay continually. A diagrammatical exposition of some of the results is also provided. Copyright © 1981, Wiley Blackwell. All rights reserved