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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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    5. Kashif Mansoor & Donal O'Neill, 2020. "Minimum Wage Compliance and Household Welfare: An analysis of over 1500 Minimum Wages," Economics Department Working Paper Series n301-20.pdf, Department of Economics, National University of Ireland - Maynooth.
    6. 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).
    7. Chau, Nancy H. & Kanbur, Ravi & Soundararajan, Vidhya, 2022. "Employer Power and Employment in Developing Countries," IZA Discussion Papers 15514, Institute of Labor Economics (IZA).
    8. Mansoor, Kashif & O'Neill, Donal, 2021. "Minimum wage compliance and household welfare: An analysis of over 1500 minimum wages in India," World Development, Elsevier, vol. 147(C).
    9. Kakkar, Shrey, 2021. "Significant movements in the debate on the Minimum Wage (1994 - 2019)," MPRA Paper 110185, University Library of Munich, Germany.
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    More about this item

    Keywords

    Minimum wage; Enforcement; Monopsony; Employment; India;
    All these keywords.

    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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