Minimum Wage Effects on Economic Growth and Fertility

ABSTRACT To present analyses of the effects of minimum wage policy on fertility and economic growth we extend an overlapping generations model by assuming individuals of two types: skilled and unskilled. The increased wage mark‐up lowers the fertility rate of unskilled workers receiving minimum wages and thereby lowers the total fertility rate. Nevertheless, the introduction of a minimum wage can be shown to boost economic growth when fertility is endogenous. Therefore, when minimum wages are introduced, the welfare of skilled workers is improved by higher growth although the welfare of unskilled workers might be lowered by low fertility.