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Minimum Wage and Ethnic-Gaps: Who are the Winners?

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  • Carlos Chávez

    (Universidad Nacional Mayor de San Marcos)

Abstract

This paper attempts to answer whether minimum wage increases help to close ethnic-gap in Peru. To answer this question, I study the period 2004–2019 and estimate the effects of minimum wage increases based on nominal minimum wage, real minimum wage, and Kaitz index terms. Also, I use several econometric strategies, but mainly I rely the results on IV-OLS and IV-Probit. I find that the minimum wage has generally benefited Whites, Mestizos, and Andeans, but especially the latter, which has boosted the closing of ethnic-gap. Minimum Wage increases has benefited mainly the Andean people in the lowest income bracket, that is, on the most vulnerable population or dependent on changes in the minimum wage. However, I find also that the minimum wage also has benefited another specific group, the high-skilled mestizos, which indicates that while the gap is reduced on the lower side, it opens on the higher side. Finally, when I analyze the probability of being employed, having informal employment, and having stable employment, I find small and non-significant impacts in most of the estimates.

Suggested Citation

  • Carlos Chávez, 2024. "Minimum Wage and Ethnic-Gaps: Who are the Winners?," Journal of Economics, Race, and Policy, Springer, vol. 7(2), pages 93-121, June.
    • Handle: RePEc:spr:joerap:v:7:y:2024:i:2:d:10.1007_s41996-024-00136-4
    DOI: 10.1007/s41996-024-00136-4
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    More about this item

    Keywords

    Minimum Wage; Income Gap; Ethnic Group; Informality; Developing Country;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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