Volume 13, Issue 47 (5-2022)
jemr 2022, 13(47): 167-219 |
Back to browse issues page
Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
Sajedi M, Amini Fard A, Nunezhad M, Haghighat A. Determining the Optimal Minimum Wage in the Framework of a Stochastic Dynamic General Equilibrium Model (Case Study of Iran). jemr 2022; 13 (47) :167-219
URL: http://jemr.khu.ac.ir/article-1-2289-en.html
URL: http://jemr.khu.ac.ir/article-1-2289-en.html
1- Social Security Organization
2- Islamic Azad University of Shiraz ,aaminifard@yahoo.com
3- Islamic Azad University of Shiraz
2- Islamic Azad University of Shiraz ,
3- Islamic Azad University of Shiraz
Abstract: (2354 Views)
In this paper, in order to determine the optimal minimum wage policy in Iran, in the framework of the new Keynesian theory, a Dynamic Stochastic General Equilibrium (DSGE) model was estimated for a small and open oil-exporting economy, according to the structure of Iran's economy in the time range of 1190 to 2019. In this model, the nominal rigidity and work habits in the supply and demand sectors are considered, and in order to simulation the economic conditions of the country, meanwhile classify the labor market in two parts; the skilled (whose maximizes its wage based on its utility) and unskilled labor, the model has considered to four parts. The main purpose of this study is to answer the question of determining and adjusting the annual minimum wage based on which of the indicators of inflation, the growth of the total wage and a combination of inflation indicators and productivity of production factors, in a situation where the economy is exposed to markup of wages and prices shocks, supply and the demand of the economy and monetary and financial policies, was optimal and it causes the least negative fluctuation (deviation) on macroeconomic variables including inflation, employment, production, consumption and investment. Based on this study, three scenarios were designed and the effect of minimum wage on economic variables was analyzed. The results of the simulation and estimation of this model, which indicate the matching of the moments of the simulated data with the real world data and based on calibration in all three scenarios, it shows that the selection sum of inflation growth and the productivity indexes to adjust the minimum wage policy, although it has cyclical effects on inflation, in comparison to other scenarios, it has the least negative deviation on economic variables and can be used as an optimal indicator for choosing the minimum wage in the Supreme Labor Council of the country.
Keywords: Dynamic Random Equilibrium Model, Optimal Minimum Wage Policy, New Keynesian Thori, Macroeconomic Variables
Type of Study: بنیادی |
Subject:
رشد و توسعه و سیاست های کلان
Received: 2023/01/8 | Accepted: 2023/04/21 | Published: 2023/07/2
Received: 2023/01/8 | Accepted: 2023/04/21 | Published: 2023/07/2
References
1. Ahlfeldt, G & Roth, D & Seidel, T, 2022. Optimal minimum wages, CEPR Discussion Papers 16913, C.E.P.R. Discussion Papers.
2. Adolfson, M., Laséen, S., Lindé, J., & Villani, M. (2007). Bayesian estimation of an open economy DSGE model with incomplete pass-through. Journal of International Economics, 72(2), 481-511. [DOI:10.1016/j.jinteco.2007.01.003]
3. Bahrami, J., Qureshi, N. (2011). Monetary Policy Analysis in the Iranian Economy in the framework of Stochastic General Equilibrium Model, Journal of Economic Modeling, 5 (13), 1-22. (In Persian)
4. Buettner, T., & Ebertz, A. (2009). Spatial implications of minimum wages. Jahrbücher für Nationalökonomie und Statistik, 229(2-3), 292-312. [DOI:10.1515/jbnst-2009-2-313]
5. Brouillette, D., GAO, D., Gervais, O., & Cheung, C. (2017). The Impacts of minimum wage increases on the Canadian Economy (No. 2017-26). Bank of Canada.
6. Bruckmeier, K., & Bruttel, O. (2021). Minimum wage as a social policy instrument: evidence from Germany. Journal of Social Policy, 50(2), 247-266. [DOI:10.1017/S0047279420000033]
7. Calvo, G. (1983). Staggered Price setting in a Utility-Maximizing framework. Journal of Monetary Economics, 12, 383-398. [DOI:10.1016/0304-3932(83)90060-0]
8. Central Bank of the Islamic Republic of Iran, Economic policy review office, Economic Report and Central Bank Balance Sheet, Different Years. . (In Persian)
9. Chen, Y. R., & Teulings, C. N. (2022). What is the optimal minimum wage? (No. 17026). CEPR Discussion Papers
10. Christiano, L. J., Eichenbaum, M., & Evans, C. L. (2005). Nominal rigidities and the dynamic effects of a shock to monetary policy. Journal of political Economy, 113(1), 1-45. [DOI:10.1086/426038]
11. Coenen, G. Erceg, C. J. Freedman, C. et al., (2012), Effects of fiscal stimulus in structural models, American Economic Journal: Macroeconomics, 4 (1), 22-68. [DOI:10.1257/mac.4.1.22]
12. Engbom, N., & Moser, C. (2022). Earnings inequality and the minimum wage: Evidence from Brazil. American Economic Review, 112(12), 3803-47. [DOI:10.1257/aer.20181506]
13. Erceg, C. J., Henderson, D. W., & Levin, A. T. (2000). Optimal monetary policy with staggered wage and price contracts. Journal of monetary Economics, 46(2), 281-313. [DOI:10.1016/S0304-3932(00)00028-3]
14. Esazadeh, S And Saeidnea, P (2004), The Minimum Wage And Methods for determining the minimum wage, Business Studies, No. 7, 29-22. . (In Persian)
15. Grau Veloso, N., Miranda, J., & Puentes Encina, E. (2018). The effects of the minimum wage on employment and wages. Discussion Papers, 466, 1 - 64
16. Khiabani, N., Amiri, H. (2014). The Monetary and Fiscal Policies of Iran with Emphasis on the Oil Sector in the framework of DSGE Models. Journal of Economic Research, 14 (54), 133-173. (In Persian)
17. Karimi,M. (2013). Examining the minimum wage behavior and its effect on youth employment in Iran's labor market. Journal of macroeconomic.10 (19), 117-140. . (In Persian)
18. Kim, J. (2014). Essays on optimal macroeconomic stabilization policy for developing economies (Doctoral dissertation, University of Colorado at Boulder).
19. Kollmann, Robert (2001), The exchange rate in a dynamic-optimizing current account model with nominal rigidities: A quantitative investigation, Journal of International Economics, 55, 243-262. [DOI:10.1016/S0022-1996(01)00087-3]
20. Kordbache, H., Ahmadi Z., Shahabadi A. (2017). Is the effect of minimum wages on inflation in Iran is related to the macroeconomic business cycle, Journal of Economic Modeling Research, 7(26), 41-64. . (In Persian) [DOI:10.18869/acadpub.jemr.7.26.41]
21. Lee, D., & Saez, E. (2012). Optimal minimum wage policy in competitive labor markets. Journal of Public Economics, 96(9-10), 739-749. [DOI:10.1016/j.jpubeco.2012.06.001]
22. McGuiness, S., & Redmond, P. (2018). Estimating the effect of an increase in the minimum wage on hours worked and employment in Ireland. Esri discussion papers series Iza DP no. 11632. [DOI:10.2139/ssrn.3209729]
23. Manzoor, D., Bahloo, M. (2015), Analysis of the effects of increasing the minimum wage on employment of simple and skilled labor in iran, Computable general equilibrium approach, 3 (12), 69-93. (In Persian)
24. Manzoor, D., Taghipour, A. Kurdbacheh, h. And Tavaklian, H (2014). Designing a stochastic dynamic general equilibrium model for the Iranian economy for analyzing and predicting the effects of monetary and financial policies, Institute of Higher Education in Management and Planning. . (In Persian)
25. Mehregan, N. (2010), Does the minimum wage lead to an increase in inflation. Journal of Economic Reserch, 44(1), 1-15. . (In Persian)
26. Manning, A (2021), The elusive employment effect of the minimum wage, Journal of Economic Perspectives 35(1): 3-26 [DOI:10.1257/jep.35.1.3]
27. Neumark, D., & Shirley, P. (2022). Myth or measurement: What does the new minimum wage research say about minimum wages and job loss in the United States?, Industrial Relations: A Journal of Economy and Society, 61(4), 384-417. [DOI:10.1111/irel.12306]
28. Porter, N., & Vitek, F. (2008). The impact of introducing a minimum wage on business cycle volatility: A structural analysis for Hong Kong SAR (No. 8-285). International Monetary Fund [DOI:10.2139/ssrn.1316753]
29. Sajedi M, Amini Fard A, Nunezhad M, Haghighat A. (2019). The Effect of Minimum Wage on Iran's Macroeconomic Variables in The Framework of a Dynamic Stochastic General Equilibrium Model. Journal of Economic Modeling Research, 10 (37), 177-226. (In Persian) [DOI:10.29252/jemr.10.37.177]
30. Simon, A., & Wilson, M. (2021). Optimal minimum wage setting in a federal system. Journal of Urban Economics, 123, 103336. [DOI:10.1016/j.jue.2021.103336]
31. Smets, F., & Wouters, R. (2003). An estimated dynamic stochastic general equilibrium model of the euro area. Journal of the European economic association, 1(5), 1123-1175. [DOI:10.1162/154247603770383415]
32. Strauss, I., Isaacs, G., & Capaldo, J. (2017). The impact of minimum wage increases on the South African economy in the Global Policy Model (No. 994969993202676). International Labour Organization.
33. Torki L, Sanizadeh V. (2023). Designing a Stochastic Dynamic General Equilibrium Model of Open Economy to Investigate the Impact of Monetary Policy on Macroeconomic Variables in Iran.
34. QJER, 23 (1) :29-53
35. Vázquez, R. M. C., Esquivel, G., & Hernández, A. S. S. (2018). The impact of the minimum wage on income and employment in Mexico. CEPAL Review, 2017(122), 189-216. [DOI:10.18356/d81adc80-en]
Send email to the article author
| Rights and permissions | |
 | This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. |
