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The Minimum Wage In Colombia 1984-2001: Favoring The Middle Class With A Bite On The Poor

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  • CARLOS A. ARANGO

    ()

  • ANGÉLICA PACHÓN

    ()

Abstract

This paper exploits the long history of the minimum wage in Colombia in order to see whether it has improved the living conditions of low income families and reduced income inequality. This paper also explores how the minimum wage may have distorted market outcomes in the process. We fi nd signifi cant negative minimum wage effects on both the likelihood of being employed and hours worked among household heads. The negative effect is strongest for women, the young and less educated people. For non-head household members, we fi nd that a rise in the minimum wage signifi cantly increases labor participation, reduces hours worked, and increases the likelihood of being unemployed. Most importantly, we fi nd evidence that the minimum wage ends up being regressive, improving the living conditions of families in the middle and the upper parts of the income distribution but causing net losses for those at the bottom

Suggested Citation

  • Carlos A. Arango & Angélica Pachón, 2007. "The Minimum Wage In Colombia 1984-2001: Favoring The Middle Class With A Bite On The Poor," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 25(55), pages 148-193, December.
  • Handle: RePEc:bdr:ensayo:v:25:y:2007:i:55:p:148-193
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    References listed on IDEAS

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    1. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-649, May.
    2. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
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    4. Neumark, David & Cunningham, Wendy & Siga, Lucas, 2006. "The effects of the minimum wage in Brazil on the distribution of family incomes: 1996-2001," Journal of Development Economics, Elsevier, vol. 80(1), pages 136-159, June.
    5. Arango Luis Eduardo & Andrés Felipe Garcia & Carlos Esteban Posada, 2008. "La metodología de la Encuesta Continua de Hogares y el empalme de las series del mercado laboral urbano de Colombia," Revista Desarrollo y Sociedad, Universidad de los Andes - CEDE, May.
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    8. Azam, Jean-Paul, 1997. "Efficiency Wage and the Family: An Explanation for the Impact of the Agricultural Minimum Wage in Morocco," Kyklos, Wiley Blackwell, vol. 50(3), pages 369-382.
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    10. 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 102-135, July.
    11. Lustig, N. & Mcleod, D., 1996. "Minimum Wages and Poverty in Developing Countries : Some Empirical Evidence," Papers 125, Brookings Institution - Working Papers.
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    Cited by:

    1. Echavarría-Soto, Juan José & López, Enrique & Ocampo, Sergio & Rodríguez-Niño, Norberto, 2012. "Choques, instituciones laborales y desempleo en Colombia," Chapters, in: Arango-Thomas, Luis Eduardo & Hamann-Salcedo, Franz Alonso (ed.), El mercado de trabajo en Colombia : hechos, tendencias e instituciones, chapter 18, pages 753-794, Banco de la Republica de Colombia.
    2. repec:eee:wdevel:v:102:y:2018:i:c:p:135-157 is not listed on IDEAS

    More about this item

    Keywords

    minimum wage; income distribution; income inequality; poverty alleviation;

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy

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