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Minimum Wages and Earnings Inequality in Urban Mexico. Revisiting the Evidence

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Author Info
Mariano Bosch
Marco Manacorda
Abstract

This paper explores the contribution of the minimum wage to the well documented rise inearnings inequality in Mexico between the late 1980 and the late 1990s. In contrast to theview that sees minimum wages as an ineffective redistributive tool in developing countries,we find that the deterioration in the real bite of the minimum wage is responsible for theentire rise in inequality at the bottom of the distribution. Our result challenges the widespreadperception that trade induced shocks are the single most important factor behind the recentrise in earnings inequality in several less developed economies.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0880.

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Date of creation: Jul 2008
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Handle: RePEc:cep:cepdps:dp0880

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Related research
Keywords: Minimum Wage; Inequality; Informality; Mexico;

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Find related papers by JEL classification:
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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