Advanced Search
MyIDEAS: Login to save this article or follow this journal

Minimum Wage Effects under Endogenous Compliance: Evidence from Peru


Author Info

  • Miguel Jaramillo Baanante

    (Grupo de Análisis para el Desarrollo. GRADE)


Latin American labor markets feature large informal sectors. In practice, however, the simple duality formal-informal has many different shades: firms tend to comply more with certain legislation than with other. Recent evidence has suggested that minimum wages have significant effects on the informal sector (Bell (1997) for Mexico; Gindling and Terrell (2004) for Costa Rica; Lemos (2004) and Fajnzylver (2001) for Brazil; and Maloney and Nuñez (2004) for Colombia). Further, some of this evidence suggests effects throughout a large part of the wage distribution. This has been interpreted as evidence of ‘lighthouse’ or numeraire effects. We test this hypothesis using panel data from Peru to identify effects throughout the wage distribution. Although there are some effects on informal sector workers, overall results provide little support for numeraire or ‘lighthouse’ effects. Labor monthly earnings are affected only at the bottom of the distribution (0.25-0.60 of the minimum wage), made up mostly of informal workers, and for formal workers earning between the old the new minima. Negative effects on the probability of retaining employed status after a minimum wage shock are either weak or non significant for wage earners below the minimum wage, but significant for formal workers ‘trapped’ between minima, and for both formal and informal earning between 1.2 and 2 times the minimum wage. Independent workers earning below minimum suffer negative effects on both earnings and employment.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:¶m2=29
Download Restriction: no

Bibliographic Info

Article provided by Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata in its journal Económica.

Volume (Year): L (2004)
Issue (Month): 1-2 (January-December)
Pages: 85-123

as in new window
Handle: RePEc:lap:journl:539

Contact details of provider:
Postal: Calle 48 No555 - La Plata (1900)
Phone: 21- 1466
Fax: 54-21-25-9536
Web page:
More information through EDIRC

Related research

Keywords: Minimum wages; informal and formal employment; institutions;

Find related papers by JEL classification:


No references listed on IDEAS
You can help add them by filling out this form.


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Guerra, Maria Lucia, 2012. "Implications of the recent macroeconomic policies on employment and labour market outcomes in Peru," ILO Working Papers 478309, International Labour Organization.
  2. Martin Schindler & Mariya Aleksynska, 2011. "Labor Market Regulations in Low-, Middle- and High-Income Countries," IMF Working Papers 11/154, International Monetary Fund.
  3. Larrain, Mauricio & Poblete, Joaquin, 2007. "Age-differentiated minimum wages in developing countries," Journal of Development Economics, Elsevier, vol. 84(2), pages 777-797, November.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:lap:journl:539. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Margarita Machelett).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.