Citation
Dixit, Shiv., Salgado, Sergio. (2025). Are Minimum Wages and Income Taxes Complements or Substitutes? .
Copyright
2025
Share:
Abstract
We study the interaction between wage floors and income taxes during a period of rising wage inequality. We document significant heterogeneity in the correlations between these policies across locations and over time. We also find that these correlations are positively associated with skill premia. To rationalize these facts, we present a model in which workers privately observe their productivity and are subject to government audits. We demonstrate how plausible restrictions on the auditing technology are sufficient to account for the observed cross-sectional and time patterns.
Professor Dixit received his Ph.D. in Economics from the University of Minnesota. He is a Macroeconomist who uses tools in dynamic contracting theory to address issues in Public Finance, Monetary Economics and Development Economics. His dissertation studied how contractual frictions interact with the amount of risk people choose to bear; rules that a government can impose on itself to discipline time-inconsistent behavior; and efficient demonetization policies. Professor Dixit previously worked at the Federal Reserve Bank of Minneapolis and the International Monetary Fund. Prior to his Ph.D., he graduated from the University of Michigan—Ann Arbor, with concentrations in Economics and Mathematics.
Shiv Dixit