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The Minimum Wage in Colombia 1984-2001: Favoring the Middle Class with a Bite on the Poor

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  • Carlos A. Arango
  • Angélica Pachón

Abstract

This paper exploits the long history of the minimum wage in Colombia in order to see whether it has im-proved the living conditions of low income families and reduced income inequality. This paper also ex-plores how the minimum wage may have distorted market outcomes in the process. We fi nd signifi cant negative minimum wage effects on both the likeli-hood of being employed and hours worked among household heads. The negative effect is strongest for women, the young and less educated people. For non-head household members, we fi nd that a rise in the minimum wage signifi cantly increases labor participation, reduces hours worked, and increases the likelihood of being unemployed. Most impor-tantly, we fi nd evidence that the minimum wage ends up being regressive, improving the living con-ditions of families in the middle and the upper parts of the income distribution but causing net losses for those at the bottom.

Suggested Citation

  • Carlos A. Arango & Angélica Pachón, 2007. "The Minimum Wage in Colombia 1984-2001: Favoring the Middle Class with a Bite on the Poor," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, vol. 25(55), pages 148-193, December.
    • Handle: RePEc:col:000107:004649
    DOI: 10.32468/Espe.5505
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    Cited by:

    1. Marlies Piek & Dieter von Fintel, 2020. "Sectoral minimum wages in South Africa: Disemployment by firm size and trade exposure," Development Southern Africa, Taylor & Francis Journals, vol. 37(3), pages 462-482, May.
    2. Echavarría-Soto, Juan José & López, Enrique & Ocampo, Sergio & Rodríguez-Niño, Norberto, 2012. "Choques, instituciones laborales y desempleo en Colombia," Chapters, in: Arango-Thomas, Luis Eduardo & Hamann-Salcedo, Franz Alonso (ed.), El mercado de trabajo en Colombia : hechos, tendencias e instituciones, chapter 18, pages 753-794, Banco de la Republica de Colombia.
    3. Ham, Andrés, 2018. "The Consequences of Legal Minimum Wages in Honduras," World Development, Elsevier, vol. 102(C), pages 135-157.
    4. Baensch Laura & Lanzalot Maria Laura & Stucchi Rodolfo & Lotti Giulia, 2019. "Do Labor Market Regulations Affect the Link between Innovation and Employment? Evidence from Latin America," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(3), pages 1-13, July.
    5. Luis E. Arango & Luz A. Flórez, 2017. "Informalidad laboral y elementos para un salario mínimo diferencial por regiones en Colombia," Borradores de Economia 1023, Banco de la Republica de Colombia.

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    More about this item

    Keywords

    minimum wage; income distribution; income inequality; poverty alleviation.;
    All these keywords.

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy

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