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Minimum wages, wages and employment in various sectors in Honduras

Author

Listed:
  • Gindling, T.H.
  • Terrell, Katherine

Abstract

This paper contributes to our understanding of the impact of minimum wages on labor markets of developing countries, where there are often multiple minimum wages and compliance is weak. We examine how changes in more than 22 minimum wages over 1990-2004 affect employment, unemployment and average wages of workers in different sectors, defined by coverage under the legislation. The evidence suggests that minimum wages are effectively enforced only in medium and large-scale firms, where a 1% increase in the minimum wage leads to an increase of 0.29% in the average wage and a relatively large reduction in employment of -Â 0.46%. We find that public sector wages emulate minimum wage trends but the higher cost of labor does not reduce employment there. There are no discernable effects of minimum wages on the wages of workers in small-firms or the self-employed; yet, higher minimum wages may create more unemployment. We conclude that (even under our upper bound estimate of the effect on the wages of workers) the total earnings of workers in the large-firm covered sector fall with higher minimum wages in Honduras, which warrants a policy dialogue on the structure and level of minimum wages.

Suggested Citation

  • Gindling, T.H. & Terrell, Katherine, 2009. "Minimum wages, wages and employment in various sectors in Honduras," Labour Economics, Elsevier, vol. 16(3), pages 291-303, June.
  • Handle: RePEc:eee:labeco:v:16:y:2009:i:3:p:291-303
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Danziger, Leif, 2010. "Endogenous monopsony and the perverse effect of the minimum wage in small firms," Labour Economics, Elsevier, vol. 17(1), pages 224-229, January.
    2. Andrés Ham, 2015. "Minimum wage violations in Honduras," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-19, December.
    3. Belman, Dale. & Wolfson, Paul., 2016. "What does the minimum wage do in developing countries? : A review of studies and methodologies," ILO Working Papers 994893283402676, International Labour Organization.
    4. Arnab K. Basu & Nancy H. Chau & Ravi Kanbur, 2015. "Contractual Dualism, Market Power and Informality," Economic Journal, Royal Economic Society, vol. 125(589), pages 1534-1573, December.
    5. Gindling, T.H. & Terrell, Katherine, 2010. "Minimum Wages, Globalization, and Poverty in Honduras," World Development, Elsevier, vol. 38(6), pages 908-918, June.
    6. Alaniz, Enrique & Gindling, T.H. & Terrell, Katherine, 2011. "The impact of minimum wages on wages, work and poverty in Nicaragua," Labour Economics, Elsevier, vol. 18(S1), pages 45-59.
    7. repec:eee:wdevel:v:102:y:2018:i:c:p:135-157 is not listed on IDEAS
    8. repec:ecr:col070:42667 is not listed on IDEAS
    9. Nidhiya Menon & Yana van der Meulen Rodgers, 2017. "The Impact of the Minimum Wage on Male and Female Employment and Earnings in India," Asian Development Review, MIT Press, vol. 34(1), pages 28-64, March.
    10. Sara Wong, 2017. "Minimum wage impacts on wages and hours worked of low-income workers in Ecuador," Working Papers PMMA 2017-14, PEP-PMMA.
    11. Selin Pelek, 2015. "The Employment Effect of the Minimum Wage: An Empirical Analysis From Turkey," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 4(1), pages 49-68, January.
    12. Fernando Alberto Groisman & Albano Blas Vergara & Analía Calero & Julia Liniado & María Eugenia Sconfienza & Maria Soledad Cubas & Santiago Boffi, 2015. "Social Protection to the Informal Sector: The Role of Minimum Wage and Income Transfer Policies," Working Papers PMMA 2015-10, PEP-PMMA.
    13. Attakrit Leckcivilize, 2015. "Does the minimum wage reduce wage inequality? Evidence from Thailand," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-23, December.
    14. Saari, M. Yusof & Rahman, M. Affan Abdul & Hassan, Azman & Habibullah, Muzafar Shah, 2016. "Estimating the impact of minimum wages on poverty across ethnic groups in Malaysia," Economic Modelling, Elsevier, vol. 54(C), pages 490-502.
    15. Salverda, Wiemer & Checchi, Daniele, 2014. "Labour-Market Institutions and the Dispersion of Wage Earnings," IZA Discussion Papers 8220, Institute for the Study of Labor (IZA).

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