Minimum wage unemployment and growth

This paper shows that, in an overlapping generations model with endogenous growth, minimum wage legislation does not necessarily has negative consequences on economic performance. Such legislation can have positive effects on growth by inducing more human capital accumulation. More precisely, a low demand for unskilled labor, induced by a minimum wage, may create an incentive for workers to accumulate human capital. Moreover, it is possible that a decrease in the minimum wage lowers the welfare of each agent in the economy.