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Minimum Wages in Colombia: Holding the Middle with a Bite

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  • Carlos Arango

    ()

  • Angélica Pachón

    ()

Abstract

This paper exploits the long history of the minimum wage in a relatively stable developing economy like Colombia in order to see whether it may alleviate the living conditions of low income families and reduce income inequality. The paper does not only explore how the minimum wage may serve these purposes, but also how it may distort market outcomes to do so. We found significant negative minimum wage effects on both the likelihood of being employed and hours worked for all family members, being it stronger for women, and the young and less educated people. We also found a positive effect on non-head participation especially in families with low human capital. But, more important, we found evidence that the minimum wage ends up being regressive, improving the living conditions of families in the middle and the upper part of the income distribution with net losses for those at the bottom.

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Bibliographic Info

Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 003224.

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Length: 41
Date of creation: 31 Mar 2004
Date of revision:
Handle: RePEc:col:000094:003224

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Keywords: Minimum wage;

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References

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  1. William Maloney & Jairo Mendez, 2004. "Measuring the Impact of Minimum Wages. Evidence from Latin America," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 109-130 National Bureau of Economic Research, Inc.
  2. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(436), pages 639-49, May.
  3. Gonzaga, Gustavo & Camargo, José Márcio & Neri, Marcelo Cortes, 2000. "Efeitos Informais Do Salário Mínimo E Pobreza," Economics Working Papers (Ensaios Economicos da EPGE) 372, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  4. Donald Robertson & James Symons, 1991. "Some Strange Properties of Panel Data Estimators," CEP Discussion Papers dp0044, Centre for Economic Performance, LSE.
  5. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  6. Richard V. Burkhauser & Kenneth A. Couch & David C. Wittenburg, 2000. "Who Minimum Wage Increases Bite: An Analysis Using Monthly Data from the SIPP and the CPS," Southern Economic Journal, Southern Economic Association, vol. 67(1), pages 16-40, July.
  7. Agenor, Pierre-Richard & Aizenman, Joshua, 1999. "Macroeconomic adjustment with segmented labor markets," Journal of Development Economics, Elsevier, Elsevier, vol. 58(2), pages 277-296, April.
  8. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, American Economic Association, vol. 84(4), pages 772-93, September.
  9. Card, David & Krueger, Alan B, 1995. "Time-Series Minimum-Wage Studies: A Meta-analysis," American Economic Review, American Economic Association, American Economic Association, vol. 85(2), pages 238-43, May.
  10. Alida Castillo Freeman & Richard B. Freeman, 1991. "Minimum Wages in Puerto Rico: Textbook Case of a Wage Floor?," NBER Working Papers 3759, National Bureau of Economic Research, Inc.
  11. Azam, Jean-Paul, 1997. "Efficiency Wage and the Family: An Explanation for the Impact of the Agricultural Minimum Wage in Morocco," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 50(3), pages 369-82.
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Citations

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Cited by:
  1. Valentina Calderón & Ana María Ibáñez, 2009. "Labor Market Effects of Migration-Related Supply Shocks: Evidence from Internally Displaced Populations in Colombia," HiCN Working Papers 69, Households in Conflict Network.
  2. Luis Eduardo Arango & Paula Herrera & Carlos Esteban Posada, 2007. "El salario mínimo: aspectos generales sobre los casos de Colombia y otros paises," BORRADORES DE ECONOMIA 002544, BANCO DE LA REPÚBLICA.
  3. Alaniz, Enrique & Gindling, T.H. & Terrell, Katherine, 2011. "The impact of minimum wages on wages, work and poverty in Nicaragua," Labour Economics, Elsevier, Elsevier, vol. 18(S1), pages S45-S59.
  4. Richard B. Freeman, 2009. "Labor Regulations, Unions, and Social Protection in Developing Countries: Market distortions or Efficient Institutions?," NBER Working Papers 14789, National Bureau of Economic Research, Inc.
  5. Adriana Kugler & Maurice Kugler, 2008. "Labor Market Effects of Payroll Taxes in Developing Countries: Evidence from Colombia," NBER Working Papers 13855, National Bureau of Economic Research, Inc.
  6. Francisco Javier Lasso Valderrama, 2010. "INCREMENTOS DEL SALARIO MÍNIMO LEGAL: ¿cuál es el impacto redistributivo del cambio en los precios relativos al consumidor?," BORRADORES DE ECONOMIA 006977, BANCO DE LA REPÚBLICA.
  7. Francisco Javier Lasso Valderrama, . "INCREMENTOS DEL SALARIO MÍNIMO LEGAL: ¿cuál es el impacto redistributivo del cambio en los precios relativos al consumidor?," Borradores de Economia 598, Banco de la Republica de Colombia.
  8. Gindling, T. H. & Terrell, Katherine, 2006. "Minimum Wages, Globalization and Poverty in Honduras," IZA Discussion Papers 2497, Institute for the Study of Labor (IZA).
  9. Cunningham, Wendy & Jacobsen, Joyce P., 2008. "Earnings inequality within and across gender, racial, and ethnic groups in four Latin American Countries," Policy Research Working Paper Series 4591, The World Bank.
  10. Betcherman, Gordon, 2014. "Labor market regulations : what do we know about their impacts in developing countries ?," Policy Research Working Paper Series 6819, The World Bank.

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