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Setting the minimum wage

  • Boeri, Tito

The process leading to the setting of the minimum wage so far has been overlooked by economists. There are two common ways of setting national minimum wages: they are either government legislated or the byproduct of collective bargaining agreements, which are extended erga omnes to all workers. We develop a simple model relating the level of the minimum wage to the setting regime. Next, we exploit a new data set on minimum wages in 68 countries having a statutory national minimum level of pay in the period 1981–2005. We find that a Government legislated minimum wage is lower than a wage floor set within collective agreements. This effect survives to several robustness checks and can be interpreted as a causal effect of the setting regime on the level of the minimum wage.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 19 (2012)
Issue (Month): 3 ()
Pages: 281-290

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Handle: RePEc:eee:labeco:v:19:y:2012:i:3:p:281-290
DOI: 10.1016/j.labeco.2012.01.001
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