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The Impact of Minimum Wages on Wage Inequality and Employment in the Formal and Informal Sector in Costa Rica

In: Inequality Around the World

Author

Listed:
  • Fatma El-Hamidi

    (University of Pittsburgh)

  • Katherine Terrell

    (University of Michigan)

Abstract

Minimum wage policies have always been controversial among economists and policy-makers and the debate has become more heated following the publication of the book by Card and Krueger (1995) and related papers (e.g. Katz and Krueger (1992), Card and Krueger (1994)). Supporters of minimum wages justify them as a way of improving the living conditions of the poor, unskilled, and unorganized workers. Critics emphasize the efficiency losses associated with their use, and disqualify them as an adequate way of affecting inequality. They argue that in developing countries minimum wages are the principal source of labour market segmentation and unemployment.

Suggested Citation

  • Fatma El-Hamidi & Katherine Terrell, 2002. "The Impact of Minimum Wages on Wage Inequality and Employment in the Formal and Informal Sector in Costa Rica," International Economic Association Series, in: Richard B. Freeman (ed.), Inequality Around the World, chapter 8, pages 188-203, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-137-09971-6_8
    DOI: 10.1007/978-1-137-09971-6_8
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    References listed on IDEAS

    as
    1. Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163, Elsevier.
    2. Drobny, Andres & Wells, John, 1983. "Wages, minimum wages, and income distribution in Brazil : Results from the construction industry," Journal of Development Economics, Elsevier, vol. 13(3), pages 305-330, December.
    3. Bell, Linda A, 1997. "The Impact of Minimum Wages in Mexico and Colombia," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 102-135, July.
    4. Lawrence F. Katz & Alan B. Krueger, 1992. "The Effect of the Minimum Wage on the Fast-Food Industry," ILR Review, Cornell University, ILR School, vol. 46(1), pages 6-21, October.
    5. Dickens, Richard & Machin, Stephen & Manning, Alan, 1999. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 1-22, January.
    6. repec:fth:prinin:298 is not listed on IDEAS
    7. Lawrence Katz & Alan Krueger, 1992. "The Effect of the Minimum Wage on the Fast Food Industry," Working Papers 678, Princeton University, Department of Economics, Industrial Relations Section..
    8. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
    9. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Differences in Needs and Assessment of Income Distributions," Bulletin of Economic Research, Wiley Blackwell, vol. 44(2), pages 77-124, April.
    10. Fiszbein, Ariel, 1992. "Do workers in the informal sector benefit from cuts in the minimum wage?," Policy Research Working Paper Series 826, The World Bank.
    11. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-649, May.
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    Citations

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    Cited by:

    1. Mr. Christopher S Adam & Mr. Edward F Buffie, 2020. "The Minimum Wage Puzzle in Less Developed Countries: Reconciling Theory and Evidence," IMF Working Papers 2020/023, International Monetary Fund.
    2. Gindling, T. H. & Terrell, Katherine, 2004. "The Effects of Multiple Minimum Wages Throughout the Labor Market," IZA Discussion Papers 1159, Institute of Labor Economics (IZA).
    3. Haroon Bhorat & Tara Caetano & Benjamin Jourdan & Ravi Kanbur & Christopher Rooney & Benjamin Stanwix & Ingrid Woolard, 2016. "Investigating the Feasibility of a National Minimum Wage for South Africa," Working Papers 201601, University of Cape Town, Development Policy Research Unit.
    4. Leonardo Becchetti & Furio Camillo Rosati, 2007. "Global Social Preferences and the Demand for Socially Responsible Products: Empirical Evidence from a Pilot Study on Fair Trade Consumers," The World Economy, Wiley Blackwell, vol. 30(5), pages 807-836, May.
    5. Chau, Nancy H. & Kanbur, Ravi & Soundararajan, Vidhya, 2022. "Employer Power and Employment in Developing Countries," IZA Discussion Papers 15514, Institute of Labor Economics (IZA).
    6. Lemos, Sara, 2004. "The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil," IZA Discussion Papers 1089, Institute of Labor Economics (IZA).
    7. Kertesi, Gábor & Köllő, János, 2004. "A 2001. évi minimálbér-emelés foglalkoztatási következményei [The employment consequences of the 2001 rise in the minimum wage]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 293-324.
    8. Lemos, Sara, 2009. "Minimum wage effects in a developing country," Labour Economics, Elsevier, vol. 16(2), pages 224-237, April.
    9. Gindling, T.H. & Terrell, Katherine, 2007. "The effects of multiple minimum wages throughout the labor market: The case of Costa Rica," Labour Economics, Elsevier, vol. 14(3), pages 485-511, June.
    10. Margherita Comola & Luiz de Mello, 2009. "How Does Decentralised Minimum-Wage Setting Affect Unemployment and Informality?: The Case of Indonesia," OECD Economics Department Working Papers 710, OECD Publishing.
    11. Anna Ruzik & Magdalena Rokicka, 2010. "The Gender Pay Gap in Informal Employment in Poland," CASE Network Studies and Analyses 406, CASE-Center for Social and Economic Research.
    12. Pérez Pérez, Jorge, 2020. "The minimum wage in formal and informal sectors: Evidence from an inflation shock," World Development, Elsevier, vol. 133(C).
    13. Leonardo Becchetti & Furio Camillo Rosati, 2005. "The demand for socially responsible products: empirical evidence from a pilot study on fair trade consumers," Working Papers 04, ECINEQ, Society for the Study of Economic Inequality.

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