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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Jürges, Hendrik / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias

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5-year IMPACT FACTOR: 0.556

CiteScore 2018: 0.54

SCImago Journal Rank (SJR) 2018: 0.356
Source Normalized Impact per Paper (SNIP) 2018: 0.394

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Volume 9, Issue 1


Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

The Optimal Policy Combination of the Minimum Wage and the Earned Income Tax Credit

Miki Malul / Israel Luski
Published Online: 2009-11-20 | DOI: https://doi.org/10.2202/1935-1682.1953


This paper evaluates the consequences of minimum wage (MW) and earned income tax credit (EITC) in a model with heterogeneous costs of investment in human capital. Our model studies the effects of a MW and an EITC on employment, productivity, and total output for two types of groups: those with a low cost of acquiring human capital and a long horizon of earnings (Type Ys); and those with a high cost of acquiring human capital and a short horizon of earnings (Type Os). We assume that Type Ys consider investing in human capital while Type Os have a certain predetermined level of human capital and do not consider changing it. Our model suggests that a government might consider imposing a MW exclusively for Type Y individuals and an EITC exclusively for Type O individuals. Some of the best effects of each policy would therefore be obtained and some of the worst consequences would be avoided.

Keywords: minimum wage (MW); earned income tax credit (EITC); human capital

About the article

Published Online: 2009-11-20

Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 9, Issue 1, ISSN (Online) 1935-1682, DOI: https://doi.org/10.2202/1935-1682.1953.

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