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Evidence on the impact of minimum wage laws in an informal sector: Domestic workers in South Africa

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  • Dinkelman, Taryn
  • Ranchhod, Vimal

Abstract

What happens when a previously uncovered labour market is regulated? We exploit the introduction of a minimum wage in South Africa and variation in the intensity of this law to identify increases in wages for domestic workers and find no statistically significant effects on the intensive or extensive margins of work. These large, partial responses to the law are somewhat surprising, given the lack of monitoring and enforcement in this informal sector. We interpret these changes as evidence that strong external sanctions are not necessary for new labour legislation to have a significant impact on informal sectors of developing countries, at least in the short-run.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8682.

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Date of creation: Dec 2011
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Handle: RePEc:cpr:ceprdp:8682

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Keywords: africa; domestic workers; informal sector; minimum wage;

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Cited by:
  1. Bhorat, Haroon & Kanbur, Ravi & Mayet, Natasha, 2013. "The Impact of Sectoral Minimum Wage Laws on Employment, Wages, and Hours of Work in South Africa," Working Papers 180096, Cornell University, Department of Applied Economics and Management.
  2. Levinsohn, James & Pugatch, Todd, 2014. "Prospective analysis of a wage subsidy for Cape Town youth," Journal of Development Economics, Elsevier, vol. 108(C), pages 169-183.
  3. Pauw, Karl & Leibbrandt, Murray, 2012. "Minimum Wages and Household Poverty: General Equilibrium Macro–Micro Simulations for South Africa," World Development, Elsevier, vol. 40(4), pages 771-783.
  4. Ronelle Burger & Marisa Coetzee & Carina van der Watt, 2013. "Estimating the benefits of linking ties in a deeply divided society: considering the relationship between domestic workers and their employers in South Africa," Working Papers 18/2013, Stellenbosch University, Department of Economics.

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