Estimating the Causal Effect of Enforcement on Minimum Wage Compliance : The Case of South Africa
AbstractThis paper attempts to estimate the causal effect of government enforcement on compliance with minimum wages in South Africa, a country where considerable non-compliance exists. The number of labour inspectors per capita is used as a proxy for enforcement, whilst non-compliance is measured using an index of violation that measures both the proportion of individuals violated, as well as the average depth of individual violation. Due to the potential simultaneity between enforcement and compliance, the number of labour inspectors is instrumented by the number of non-inspectors. The results suggest that there are a variety of factors impacting on violation, including firm-level, sectoral and spatial characteristics. One of the key determinants of violation is found to be the local unemployment rate. However, the number of labour inspectors is found to be insignificant in determining non-compliance.
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Bibliographic InfoPaper provided by University of Cape Town, Development Policy Research Unit in its series Working Papers with number 11145.
Length: 17 pages
Date of creation: Nov 2011
Date of revision:
Publication status: Published in Working Paper Series by the Development Policy Research Unit, November 2011, pages 1-17
Minimum Wage; Enforcement; Compliance; Depth of Violation; South Africa;
Find related papers by JEL classification:
- A1 - General Economics and Teaching - - General Economics
This paper has been announced in the following NEP Reports:
- NEP-AFR-2012-05-22 (Africa)
- NEP-ALL-2012-05-22 (All new papers)
- NEP-DEV-2012-05-22 (Development)
- NEP-LAB-2012-05-22 (Labour Economics)
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