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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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  • Taryn Dinkelman
  • Vimal Ranchhod

    () (SALDRU, School of Economics, University of Cape Town)

Abstract

What happens when a previously uncovered labor 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 and formal contract coverage, and no significant effects on employment on the intensive or extensive margins for domestic workers. 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 external sanctions are not necessary for new labor 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 Southern Africa Labour and Development Research Unit, University of Cape Town in its series SALDRU Working Papers with number 44.

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Date of creation: Jul 2010
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Handle: RePEc:ldr:wpaper:44

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  1. Stephen G. Donald & Kevin Lang, 2007. "Inference with Difference-in-Differences and Other Panel Data," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 221-233, May.
  2. Dinardo, J. & Fortin, N.M. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Cahiers de recherche 9406, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  3. James B. Rebitzer & Lowell J. Taylor, 1991. "The Consequences of Minimum Wage Laws: Some New Theoretical Ideas," NBER Working Papers 3877, National Bureau of Economic Research, Inc.
  4. Basu, Arnab K. & Chau, Nancy & Kanbur, Ravi, 2007. "Turning a Blind Eye: Costly Enforcement, Credible Commitment and Minimum Wage Laws," IZA Discussion Papers 2998, Institute for the Study of Labor (IZA).
  5. James Konow, 2003. "Which Is the Fairest One of All? A Positive Analysis of Justice Theories," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1188-1239, December.
  6. Sara Lemos, 2006. "Minimum Wage Effects in a Developing Country," Discussion Papers in Economics 06/1, Department of Economics, University of Leicester.
  7. Falk, Armin & Fehr, Ernst & Zehnder, Christian, 2005. "The Behavioural Effects of Minimum Wages," CEPR Discussion Papers 5115, C.E.P.R. Discussion Papers.
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Cited by:
  1. James A. Levinsohn & Todd Pugatch, 2011. "Prospective Analysis of a Wage Subsidy for Cape Town Youth," NBER Working Papers 17248, National Bureau of Economic Research, Inc.

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