IDEAS home Printed from
   My bibliography  Save this article

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.

Suggested Citation

  • Boeri, Tito, 2012. "Setting the minimum wage," Labour Economics, Elsevier, vol. 19(3), pages 281-290.
  • Handle: RePEc:eee:labeco:v:19:y:2012:i:3:p:281-290
    DOI: 10.1016/j.labeco.2012.01.001

    Download full text from publisher

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    1. Assar Lindbeck & Sten Nyberg & Jörgen W. Weibull, 1999. "Social Norms and Economic Incentives in the Welfare State," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 1-35.
    2. Dani Rodrik, 1999. "Democracies Pay Higher Wages," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 707-738.
    3. Yann Algan & Pierre Cahuc, 2007. "Social Attitudes and Economic Development : an Epidemiological Approach," Working Papers hal-01066088, HAL.
    4. William Brown, 2009. "The Process of Fixing the British National Minimum Wage, 1997-2007," British Journal of Industrial Relations, London School of Economics, vol. 47(2), pages 429-443, June.
    5. Leif Danziger, 2009. "The elasticity of labor demand and the minimum wage," Journal of Population Economics, Springer;European Society for Population Economics, vol. 22(3), pages 757-772, July.
    6. Boeri, Tito & Macis, Mario, 2010. "Do unemployment benefits promote or hinder job reallocation?," Journal of Development Economics, Elsevier, vol. 93(1), pages 109-125, September.
    7. Silberman, Jonathan I & Durden, Garey C, 1976. "Determining Legislative Preferences on the Minimum Wage: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 317-329, April.
    8. Christopher J. Flinn, 2006. "Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates," Econometrica, Econometric Society, vol. 74(4), pages 1013-1062, July.
    9. Nickell, S J & Andrews, M, 1983. "Unions, Real Wages and Employment in Britain 1951-79," Oxford Economic Papers, Oxford University Press, vol. 35(0), pages 183-206, Supplemen.
    10. Tito Boeri & Michael C. Burda, 2009. "Preferences for Collective Versus Individualised Wage Setting," Economic Journal, Royal Economic Society, vol. 119(540), pages 1440-1463, October.
    11. Ashenfelter, Orley & Card, David, 1985. "Using the Longitudinal Structure of Earnings to Estimate the Effect of Training Programs," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 648-660, November.
    12. Uri, Noel D & Mixon, J Wilson, Jr, 1980. "An Economic Analysis of the Determinants of Minimum Wage Voting Behavior," Journal of Law and Economics, University of Chicago Press, vol. 23(1), pages 167-177, April.
    13. Neumark, David & Wascher, William L., 2007. "Minimum Wages and Employment," Foundations and Trends(R) in Microeconomics, now publishers, vol. 3(1–2), pages 1-182, March.
    14. André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
    15. André Blais & Jean-Michel Cousineau & Kenneth McRoberts, 1989. "The determinants of minimum wage rates," Public Choice, Springer, vol. 62(1), pages 15-24, July.
    16. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
    17. Boeri, Tito & Macis, Mario, 2008. "Do Unemployment Benefits Promote or Hinder Structural Change?," IZA Discussion Papers 3371, Institute for the Study of Labor (IZA).
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. André Lorentz & Tommaso Ciarli & Maria Savona & Marco Valente, 2016. "The effect of demand-driven structural transformations on growth and technological change," Journal of Evolutionary Economics, Springer, vol. 26(1), pages 219-246, March.
    2. Andrea Garnero & Stephan Kampelmann & François Rycx, 2013. "Sharp Teeth or Empty Mouths? Revisiting the Minimum Wage Bite with Sectoral Data," Working Papers CEB 13-016, ULB -- Universite Libre de Bruxelles.
    3. Ive Marx & Sarah Marchal & Brian Nolan, 2012. "GINI DP 56: Mind the Gap: Net Incomes of Minimum Wage Workers in the EU and the US," GINI Discussion Papers 56, AIAS, Amsterdam Institute for Advanced Labour Studies.
    4. Richard Dickens, 2015. "How are minimum wages set?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 211-211, December.
    5. Andrea Garnero & Stephan Kampelmann & François Rycx, 2015. "Sharp Teeth or Empty Mouths? European Institutional Diversity and the Sector-Level Minimum Wage Bite," British Journal of Industrial Relations, London School of Economics, vol. 53(4), pages 760-788, December.
    6. Martins, Pedro S., 2014. "30,000 Minimum Wages: The Economic Effects of Collective Bargaining Extensions," IZA Discussion Papers 8540, Institute for the Study of Labor (IZA).
    7. Eliav Danziger & Leif Danziger, 2015. "A Pareto-improving Minimum Wage," Economica, London School of Economics and Political Science, vol. 82(326), pages 236-252, April.
    8. Anna Lukiyanova & Nina Vishnevskaya, 2015. "The Decentralization of Minimum Wage Setting in Russia Economies," HSE Working papers WP BRP 90/EC/2015, National Research University Higher School of Economics.
    9. Pedro S. Martins, 2014. "30,000 minimum wages: The economic effects of collective agreement extensions," Working Papers 51, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    10. Casanova, Luis. & Jiménez, Maribel. & Jiménez, Mónica., 2015. "Calidad del empleo y cumplimiento del salario mínimo en Argentina," ILO Working Papers 994891263402676, International Labour Organization.
    11. Anna Lukiyanova, 2016. "Regional Variation In The Minimum Wage Policies In The Russian Federation (2007-2015)," Public administration issues, Higher School of Economics, issue 1, pages 81-102.
    12. Nina Vishnevskaya, 2016. "Regionalization of Minimum Wages," Public administration issues, Higher School of Economics, issue 4, pages 27-44.
    13. Matteo G. Richiardi, 2015. "Liberia.Expanding formal employment through labour market reforms," LABORatorio R. Revelli Working Papers Series 144, LABORatorio R. Revelli, Centre for Employment Studies.
    14. Arpaia, Alfonso & Cardoso, Pedro & Kiss, Aron & Van Herck, Kristine & Vandeplas, Anneleen, 2017. "Statutory Minimum Wages in the EU: Institutional Settings and Macroeconomic Implications," IZA Policy Papers 124, Institute for the Study of Labor (IZA).
    15. M. Ali Choudhary & Saima Mahmood & Sajawal Khan & Waqas Ahmed & Gylfi Zoega, 2013. "Sticky Wages in a Developing Country: Lessons from Structured Interviews in Pakistan," School of Economics Discussion Papers 0213, School of Economics, University of Surrey.
    16. 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).
    17. repec:ilo:ilowps:462988 is not listed on IDEAS

    More about this item


    Minimum wages; Collective bargaining; Statutory minimum;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:labeco:v:19:y:2012:i:3:p:281-290. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.