doi:10.1016/j.eap.2023.08.009engMedrano-Adán, LuisSalas-Fumás, VicenteDo minimum wages deliver what they promise? Effects of minimum wage on employment, output, and income inequality from occupational choice theoryART-2023-135255This paper addresses the unresolved debate on the effects of minimum wages on output, employment, and income inequality by modeling an occupational choice economy calibrated for a representative OECD economy. The minimum wage sets a minimum skill requirement for employees, which reduces the effective labor supply and raises its price. Consequently, salaries increase, business profits fall, and some entrepreneurs transition to solo self-employment. With a minimum-to-average wage ratio of 0.43 (the OECD countries average in 2020), a 10% increase in the minimum wage reduces output, employment, and inequality among employees by 0.2%, 1.0%, and 2.1%, respectively, and increases total income inequality by 0.57%. If the minimum-to-average wage ratio were 0.55, output, employment, and inequality among employees would decrease by 0.87%, 3.55%, and 5.19%, respectively, and income inequality would rise by 2.09%. In summary, the effects are mainly negative, contrary to what is promised, and quantitatively large for high minimum-to-average wage ratios.2023http://zaguan.unizar.es/record/12809310.1016/j.eap.2023.08.009http://zaguan.unizar.es/record/128093oai:zaguan.unizar.es:128093Economic Analysis and Policy 80 (2023), 366-383by-nc-ndhttp://creativecommons.org/licenses/by-nc-nd/3.0/es/info:eu-repo/semantics/openAccess