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Inflation Stabilization and the Vanishing Size-Wage Effect

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  • Christopher Woodruff

Abstract

The author examines wage patterns under an incomes policy in Mexico in 1987–94. The policy specified increases in the minimum wage rate, but also guided salary negotiations more generally. The author finds indications of a substantial but largely temporary effect on wage rates, and evidence consistent with more intensive monitoring of compliance in large firms than in smaller ones. For example, three years after policy implementation, public sector wages had fallen approximately 10% relative to private sector wages, and wages in the largest private firms had fallen 15% relative to those in the smallest private firms. These relative wage effects are consistent with the centralized administration of the policy.

Suggested Citation

  • Christopher Woodruff, 1999. "Inflation Stabilization and the Vanishing Size-Wage Effect," ILR Review, Cornell University, ILR School, vol. 53(1), pages 103-122, October.
    • Handle: RePEc:sae:ilrrev:v:53:y:1999:i:1:p:103-122
    DOI: 10.1177/001979399905300106
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    References listed on IDEAS

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    1. Brown, William, 1976. "Incomes Policy and Pay Differentials: The Impact of Incomes Policy upon Workplace Wage Determination in the Engineering Industry 1972-75," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 38(1), pages 27-49, February.
    2. Revenga, Ana, 1997. "Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 20-43, July.
    3. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-1059, October.
    4. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 367-397.
    5. John Williamson, 1994. "The Political Economy of Policy Reform," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 68, October.
    6. Carrington, William J & McCue, Kristin & Pierce, Brooks, 1996. "The Role of Employer-Employee Interactions in Labor Market Cycles: Evidence from the Self-Employed," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 571-602, October.
    7. Reid, Frank, 1981. "Control and Decontrol of Wages in the United States: An Empirical Analysis," American Economic Review, American Economic Association, vol. 71(1), pages 108-120, March.
    8. Mahmood A. Zaidi, 1986. "Do Incomes Policies Restrain Wage Inflation? Some Evidence From Australia, Canada, and the United States," The Economic Record, The Economic Society of Australia, vol. 62(4), pages 468-484, December.
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    Cited by:

    1. David Fairris & Gurleen Popli & Eduardo Zepeda, 2008. "Minimum Wages and the Wage Structure in Mexico," Review of Social Economy, Taylor & Francis Journals, vol. 66(2), pages 181-208.
    2. repec:sus:susphd:0322 is not listed on IDEAS

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