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Heterogeneous effects of imperfectly enforced minimum wages in low-wage labor markets

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  • Soundararajan, Vidhya

Abstract

We present minimum wage effects across different enforcement regimes. Exploiting state-time variation and policy discontinuities at contiguous districts across state borders in India, we show that the effect of minimum wages on wages and employment significantly increases with an increase in enforcement. In weak enforcement regimes, estimated wage effects are negligible and employment effects are negative or null. In stricter regimes, wage effects are positive and strong, and employment effects are positive or null in most specifications. These results are consistent with theories on imperfect enforcement in monopsonistic labor markets, and are robust to alternative definitions of enforcement and employment, and employing instrumental variables for enforcement.

Suggested Citation

  • Soundararajan, Vidhya, 2019. "Heterogeneous effects of imperfectly enforced minimum wages in low-wage labor markets," Journal of Development Economics, Elsevier, vol. 140(C), pages 355-374.
    • Handle: RePEc:eee:deveco:v:140:y:2019:i:c:p:355-374
    DOI: 10.1016/j.jdeveco.2019.06.010
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    Cited by:

    1. Kashif Mansoor & Donal O'Neill, 2020. "Minimum Wage Compliance and Household Welfare: An analysis of over 1500 Minimum Wages," Economics, Finance and Accounting Department Working Paper Series n301-20.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    2. Andrea Garnero & Claudio Lucifora, 2020. "Turning A Blind Eye? Compliance To Minimum Wages And Employment," DISCE - Working Papers del Dipartimento di Economia e Finanza def085, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    3. Pérez Pérez, Jorge, 2020. "The minimum wage in formal and informal sectors: Evidence from an inflation shock," World Development, Elsevier, vol. 133(C).
    4. Gudibande, Rohan Ravindra & Jacob, Arun, 2020. "Minimum wages for domestic workers: impact evaluation of the Indian experience," World Development, Elsevier, vol. 130(C).

    More about this item

    Keywords

    Minimum wage; Enforcement; Monopsony; Employment; India;

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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