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Minimum Wages, Inequality and Globalization

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  • T. H. Gindling

    ()

  • Katherine Terrell

    ()

Abstract

This paper contributes to our understanding of the impact of institutions on incomes of workers in developing countries by rigorously addressing the question as to whether changes in minimum wages can change the inequality of the distribution of earnings. More specifically, we analyze whether changes in Costa Rica’s complex institution of multiple minimum wages in the 1980s and 1990s acted as a countervailing force to the unequalizing effect of globalization. Using annual data on workers from the 1987-1997 household surveys, it is shown that changes in the legal minimum wages did indeed have an effect on wage inequality and that these changes would not have been captured using the simple interpretation of minimum wages found in much of the literature.

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File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp700.pdf
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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2004-700.

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Length: 27 pages
Date of creation: 01 May 2004
Date of revision:
Handle: RePEc:wdi:papers:2004-700

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Keywords: minimum wages; employment; wages; Costa Rica;

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References

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  1. Gindling, T. H. & Robbins, Donald, 2001. "Patterns and Sources of Changing Wage Inequality in Chile and Costa Rica During Structural Adjustment," World Development, Elsevier, Elsevier, vol. 29(4), pages 725-745, April.
  2. E. Berman & J. Bound & S. Machin, 1997. "Implications of skill-biased technological change: international evidence," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 20314, London School of Economics and Political Science, LSE Library.
  3. Robbins, Donald & Gindling, T H, 1999. "Trade Liberalization and the Relative Wages for More-Skilled Workers in Costa Rica," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 3(2), pages 140-54, June.
  4. David Card & John E. DiNardo, 2002. "Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," NBER Working Papers 8769, National Bureau of Economic Research, Inc.
  5. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 240-45, May.
  6. Cortez, Willy W., 2001. "What is Behind Increasing Wage Inequality in Mexico?," World Development, Elsevier, Elsevier, vol. 29(11), pages 1905-1922, November.
  7. Bell, Linda A, 1997. "The Impact of Minimum Wages in Mexico and Colombia," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 15(3), pages S102-35, July.
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Cited by:
  1. TH Gindling & Juan Diego Trejos, 2005. "Accounting for Changing Earnings Inequality in Costa Rica, 1980-99," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 41(5), pages 898-926.
  2. Arias, Omar & Blom, Andreas & Bosch, Mariano & Cunningham, Wendy & Fiszbein, Ariel & Lopez Acevedo, Gladys & Maloney, William & Saavedra, Jaime & Sanchez-Paramo, Carolina & Santamaria, Mauricio & Siga, 2005. "Pending issues in protection, productivity growth, and poverty reduction," Policy Research Working Paper Series 3799, The World Bank.
  3. Gindling, T.H. & Terrell, Katherine, 2007. "The effects of multiple minimum wages throughout the labor market: The case of Costa Rica," Labour Economics, Elsevier, Elsevier, vol. 14(3), pages 485-511, June.

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