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The Macroeconomic Effect of Minimum Wage Increase in Nigeria: A DSGE Approach

Alege, P. O. and Oye, Queen-Esther and Adu, O. I. and Ogundipe, Adeyemi A. (2019) The Macroeconomic Effect of Minimum Wage Increase in Nigeria: A DSGE Approach. In: Nigerian Economic Society Annual Conference, September 16 -18, 2019, Abuja, Nigeria.

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The minimum wage is an economic policy tool aimed at raising the earning of low-income households with the ultimate objective to improve the living standard of these group of workers. Nigeria, has over time, enacted four national minimum wage acts. The most recent is the Minimum Wage Repeal and Enactment Act 2019 which has increased the minimum payment to workers from N18, 000 to N30, 000, representing a surge of about 66.67 per cent. Upon implementation of this new bill, it is expected to have varying macroeconomic effects ranging from wage effects, employment effects, distributional effects, welfare effects and price effects among others. This study, therefore examines the macroeconomic effects of the four episodes of the minimum wage increase in Nigeria by calibrating and log-linearising a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model that is extended to include labour heterogeneity. The study found that minimum wage increase does not improve household welfare and living standard neither does it have any positive growth effect. Furthermore, it strains government finances. The implication of the finding is that minimum wage policy shouldbe complemented with other pro-poor and inclusive development policies in order to improve the quality of life for the poor and vulnerable low income workers

Item Type: Conference or Workshop Item (Paper)
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
Divisions: Faculty of Law, Arts and Social Sciences > School of Social Sciences
Depositing User: Mrs Hannah Akinwumi
Date Deposited: 27 Jun 2021 19:54
Last Modified: 27 Jun 2021 19:54

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