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The B.E. Journal of Macroeconomics

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Do Minimum Wages Raise the NAIRU?

Peter Tulip
  • 1Federal Reserve Board,
Published Online: 2004-04-01 | DOI: https://doi.org/10.2202/1534-5998.1163

Maybe a lot. The ratio of the minimum wage to the average wage enters a Phillips-curve equation with a coefficient that is highly significant, stable, and robust. One interpretation of these results is that the relative level of the minimum wage affects the Non-Accelerating Inflation Rate of Unemployment or NAIRU. My estimates are consistent with the reduction in the relative level of the minimum wage since 1980 lowering the U.S. NAIRU about 1½ percentage points, while raising the NAIRU in continental Europe. However, other interpretations are also possible.

Keywords: NAIRU; minimum wage

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Published Online: 2004-04-01

Citation Information: Topics in Macroeconomics, ISSN (Online) 1534-5998, DOI: https://doi.org/10.2202/1534-5998.1163. Export Citation

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