The Minimum Wage Puzzle in Less Developed Countries

Adam, Christopher; Buffie, Edward F.

doi:10.5089/9781513527888.001

Cited by 8 publications

(5 citation statements)

References 39 publications

(60 reference statements)

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“…The so-called lighthouse effects are widely recognized in the literature. Gindling ( 2018found that a higher minimum wage depresses wages among estimated wage effects based in selected minimum wage studies is provided by Adam and Buffie (2020). Gindling and Terrell (2005) showed an elasticity of 0.15 for urban informal workers in urban areas and 0.40 for rural informal workers in Costa Rica; Neumark et al (2006) estimated elasticity of 0.43 for Brazil, and Menon and Rodgers (2017) estimated elasticities of 1.08 and 0.69 for men and women, respectively, in the rural area for India.…”

Section: Wage Effectsmentioning

confidence: 99%

“…Even though literature shows a similar result, it has its weaknesses. From a policy standpoint, absent any substantive input from theory, the stylized facts are something of a black box: a set of potentially significant, policyrelevant results that we do not understand and therefore cannot fully trust (Adam and Buffie 2020). The problem was noted by Brown (1989) and has unchanged to the present day.…”

Section: Directions For Future Researchmentioning

confidence: 99%

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Minimum Wages in Developing Countries

Fang

Ha²

2022

SSRN Journal

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Section: Wage Effectsmentioning

confidence: 99%

Section: Directions For Future Researchmentioning

confidence: 99%

Minimum Wages in Developing Countries

Fang

Ha²

2022

SSRN Journal

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“…In OECD countries, an increase in the MW is likely to result in lower wage dispersion as it tends to benefit low-skilled workers (OECD 2011) and thus could help reduce earnings inequality. In developing countries with large shares of the workforce in informal employment, where statutory MWs cannot be enforced, they often tend to spill over nevertheless, raising incomes in both formal and informal employment relationships, suggesting significant market power of employers in the formal economy (Adam and Buffie, 2020).…”

Section: Minimum Wagesmentioning

confidence: 99%

Inclusivity in the Labor Market

Schindler¹,

Ernst²,

El-Ganainy³

et al. 2021

IMF Working Papers

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Labor earnings are the dominant income source for most individuals. Thus, an inclusive labor market is key for ensuring inclusive growth. In this paper we propose four principles that an inclusive labor market will embody: access, fairness, protection and voice. While measuring inclusivity presents challenges, we discuss how data can be used to shed light on the extent of inclusivity and document cross-country trends and stylized facts. We also discuss the role of policy in achieving an inclusive labor market, focusing on the need to rebalance growth; improve risk sharing; and fight discrimination. Several messages emerge. First, some policies entail a trade-off between the different dimensions of inclusivity. Second, it is important to view policies as a bundle, taking into account substitution and complementarities. Third, some policies are win-win, in the sense that they both increase inclusivity and improve overall efficiency.

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“…In this approach, minimum wage regulation is expected to have negative effects on employment in general and on some specific workers, especially in the long run [21,22]. From a theoretical point of view, this negative effect is higher in the less developed economies that are dominated by sectors less intensive in capital, with limited access to finance and with less sophisticated and developed financial industry [23][24][25]. Minimum wage is claimed to protect worker wealth and to reduce social inequalities but imposing it has the opposite effect on employers, especially during economic recessions.…”

Section: Literature Reviewmentioning

confidence: 99%

The Impact of the Minimum Wage on Employment: An EU Panel Data Analysis

et al. 2021

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Minimum wage laws have become one of the most debated state interventions in the economy, being considered by many specialists as a very efficient tool used to correct certain labour market failures. The aim of this paper is to explore the relationship between minimum wage and employment dynamics, with a special focus on some vulnerable categories recognized in the literature (young people, female workers, the elderly, etc.). Thus, we analysed the relation between the dynamics of minimum wages and that of employment in 22 EU countries, panel data (1999–2016). The results suggest a negative impact of the minimum wage on total employment and on sensitive categories (youth, female workers, the elderly). The long-running negative impact holds for all but one group (55–64 years). The models were tested for random and fixed effects and the results were correspondingly adjusted with country and time and random and fixed effects. Cointegration tests and the tests using lagged minimum wage also confirm a robust relationship between the dynamics of the minimum wage and that of employment over time. Our findings are consistent with many previous studies and confirm the recommendations to prudently use this public policy tool.

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The Minimum Wage Puzzle in Less Developed Countries

Abstract: We show that a dynamic general equilibrium model with efficiency wages and endogenous capital accumulation in both the formal and (non-agricultural) informal sectors can explain the full range of confounding stylized facts associated with minimum wage laws in less developed countries.

Cited by 8 publications

References 39 publications

Minimum Wages in Developing Countries

Minimum Wages in Developing Countries

Inclusivity in the Labor Market

The Impact of the Minimum Wage on Employment: An EU Panel Data Analysis

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