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The Effects of Multiple Minimum Wages Throughout the Labor Market

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Author Info
T. H. Gindling ()
Katherine Terrell ()

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Abstract

This paper investigates the effects of legal minimum wages on wages, employment, hours worked and monthly earnings among workers covered by minimum wage legislation as well as those for whom it does not apply (the uncovered sector) in Costa Rica. This country’s large uncovered sector and complex minimum wage policy, which has for decades set numerous wages throughout the wage distribution, provide a stimulating counterpoint to the U.S. framework for the analysis of the impact of minimum wages. We find that legal minimum wages have a significant positive effect on the wages of workers in the covered sector (with an elasticity of 0.10) but no effect on wages of workers in the uncovered sector. We also find that a 10% increase in minimum wages lowers employment in the covered sector by 1.09% and decreases the average number of hours worked of those who remain in the covered sector by about 0.6%. Finally, we show that despite the wide range of minimum wages, the largest impact on the wages and employment of covered sector workers is in the lower half of the distribution.

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Publisher Info
Paper provided by William Davidson Institute at the University of Michigan Stephen M. Ross Business School in its series William Davidson Institute Working Papers Series with number 2004-701.

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Length: 44 pages
Date of creation: 01 May 2004
Date of revision:
Handle: RePEc:wdi:papers:2004-701

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

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Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Katherine Terrell & Fatma El Hamidi, 2001. "The Impact of Minimum Wages on Wage Inequality and Employment in the Formal and Informal Sector in Costa Rica," William Davidson Institute Working Papers Series 479, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  2. Alan B. Krueger, 1994. "The Effect of the Minimum Wage When It Really Bites: A Reexamination of the Evidence from Puerto Rico," NBER Working Papers 4757, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June. [Downloadable!] (restricted)
  4. Maloney, William F. & Nunez, Jairo & Cunningham, Wendy & Fiess, Norbert & Montenegro, Claudio & Murrugarra, Edmundo & Santamaria,Mauricio & Sepulveda, Claudia, 2001. "Measuring the impact of minimum wages : evidence from Latin America," Policy Research Working Paper Series 2597, The World Bank. [Downloadable!]
    Other versions:
  5. Pablo Fajnzylber, 2001. "Minimum Wage Effects Throughout the Wage Distribution: Evidence from Brazil's Formal and Informal Sectors," Anais do XXIX Encontro Nacional de Economia [Proceedings of the 29th Brazilian Economics Meeting] 098, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
  6. Tauchen, George E, 1981. "Some Evidence on Cross-Sector Effects of the Minimum Wage," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 529-47, June. [Downloadable!] (restricted)
  7. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "Minimum Wages and Employment in France and the United States," NBER Working Papers 6996, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163 Elsevier. [Downloadable!] (restricted)
  9. David Neumark & Mark Schweitzer & William Wascher, 2000. "The Effects of Minimum Wages Throughout the Wage Distribution," NBER Working Papers 7519, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. repec:fth:prinin:330 is not listed on IDEAS
  11. Dickens, Richard & Machin, Stephen & Manning, Alan, 1999. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 1-22, January. [Downloadable!] (restricted)
    Other versions:
  12. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January. [Downloadable!] (restricted)
  13. Bell, Linda A, 1997. "The Impact of Minimum Wages in Mexico and Colombia," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S102-35, July. [Downloadable!] (restricted)
  14. Sara Lemos, 2004. "The Effects Of The Minimum Wage On Wages And Employment In Brazil - A Menu Of Minimum Wage Variables," Labor and Demography 0403008, EconWPA. [Downloadable!]
  15. Ashenfelter, Orley & Smith, Robert S, 1979. "Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 333-50, April. [Downloadable!] (restricted)
    Other versions:
  16. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-79, July. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gindling, T.H. & Terrell, Katherine, 2008. "Minimum Wages, Globalization, and Poverty in Honduras," Working Papers RP2008/23, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
    Other versions:
  2. Andalon, Mabel & Pagés, Carmen, 2008. "Minimum Wages in Kenya," IZA Discussion Papers 3390, Institute for the Study of Labor (IZA). [Downloadable!]
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