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The long run wage-employment elasticity: Evidence from Colombia

Author

Listed:
  • Jhon James Mora

    (Departamento de Economía. Universidad ICESI)

  • Juan Muro

    (Departamento de Economía. Universidad de Alcalá)

Abstract

Several years ago, many articles showed that the relationship between wage increases and unemployment rise is not clear in the USA. This USA evidence was important to determine the recommendation of Stiglitz that a 22% increase of the minimum wage in Spain will not reduce the employment in 2018. To our view, the USA evidence is insufficient to consider that this advice can be extended to all countries. Differences in regulations, institutions and welfare systems –mainly unemployment insurance-, among others, may produce around the world different results to the expected outcome in the USA that an increase of the real wages does not provoke an unemployment rise. Colombia as a developing country, with institutions that differ in design and practice from those of the USA, could be a good testing example. In this paper, we analyse the effect of a rise in wages on the demand for employment using Colombian data. Our meta-analysis shows that a 1% real wage increment causes an 0,11% employment fall in the long run. These results stand despite publication biases.

Suggested Citation

  • Jhon James Mora & Juan Muro, 2019. "The long run wage-employment elasticity: Evidence from Colombia," Alcamentos 1901, Universidad de Alcalá, Departamento de Economía..
    • Handle: RePEc:alc:alcamo:1901
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    More about this item

    Keywords

    Wage-employment elasticity; meta-analysis; publication bias;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods

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