IDEAS home Printed from https://ideas.repec.org/p/ags/pugtwp/333454.html

Intended and Unintended Impacts of Minimum Wage Change: A Computable General Equilibrium Model Analysis with Cross-border Labor Mobility in the Philippines

Author

Listed:
  • Sy, Deborah Kim
  • Hosoe, Nobuhiro

Abstract

Minimum wage is used as a support for low-wage workers, but it is expected to increase unemployment and cause deterioration of the welfare of the unemployed. While earlier studies identify negative side effects of minimum wage, that may not be the case in the Philippines, where many workers migrate and send home large remittances. This study uses a computable general equilibrium model to examine the impacts of an increase in the domestic minimum wage on unemployment, migration, and output, as well as on welfare and inequality, in the Philippines. Our simulation results show that a minimum wage increase would indeed reduce domestic labor demand and prompt many unemployed workers to migrate out, leaving relatively few unemployed at home. While an increased volume of remittances would improve household welfare, it would also have some unintended effects, such as currency appreciation; decreased domestic production in labor-intensive and export-oriented industries; greater income disparity; and tax base erosion.

Suggested Citation

  • Sy, Deborah Kim & Hosoe, Nobuhiro, 2022. "Intended and Unintended Impacts of Minimum Wage Change: A Computable General Equilibrium Model Analysis with Cross-border Labor Mobility in the Philippines," Conference papers 333454, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333454
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/333454/files/11419.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," Working Papers 680, Princeton University, Department of Economics, Industrial Relations Section..
    2. Acosta, Pablo A. & Lartey, Emmanuel K.K. & Mandelman, Federico S., 2009. "Remittances and the Dutch disease," Journal of International Economics, Elsevier, vol. 79(1), pages 102-116, September.
    3. Nobuhiro Hosoe, 2000. "Dependency of simulation results on the choice of numeraire," Applied Economics Letters, Taylor & Francis Journals, vol. 7(7), pages 475-477.
    4. Gerardo P. Sicat, 2004. "Reforming the Philippine Labor Market," UP School of Economics Discussion Papers 200404, University of the Philippines School of Economics.
    5. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," ILR Review, Cornell University, ILR School, vol. 46(1), pages 22-37, October.
    6. Richard Adams, 2011. "Evaluating the Economic Impact of International Remittances On Developing Countries Using Household Surveys: A Literature Review," Journal of Development Studies, Taylor & Francis Journals, vol. 47(6), pages 809-828.
    7. John Schmitt, 2015. "Explaining the Small Employment Effects of the Minimum Wage in the United States," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 54(4), pages 547-581, October.
    8. Gerardo P. Sicat, 2004. "Reforming the Philippine Labor Market," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 41(2), pages 1-36, December.
    9. Christian Hubert Ebeke, 2014. "Do International Remittances Affect The Level And The Volatility Of Government Tax Revenues?," Journal of International Development, John Wiley & Sons, Ltd., vol. 26(7), pages 1039-1053, October.
    10. Piriya Pholphirul, 2019. "South–south labour migration and sustainable development: Implications for Southeast Asian countries," Sustainable Development, John Wiley & Sons, Ltd., vol. 27(1), pages 1-12, January.
    11. Hossain, Sharif M. & Hosoe, Nobuhiro, 2020. "Welfare and equity impacts of cross-border factor mobility in Bangladesh: A general equilibrium analysis," Economic Modelling, Elsevier, vol. 87(C), pages 172-184.
    12. Emmanuel K. K. Lartey & Federico S. Mandelman & Pablo A. Acosta, 2012. "Remittances, Exchange Rate Regimes and the Dutch Disease: A Panel Data Analysis," Review of International Economics, Wiley Blackwell, vol. 20(2), pages 377-395, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sy, Deborah Kim & Hosoe, Nobuhiro, 2023. "Consequences of a minimum wage increase in a migrant-sending country," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1057-1066.
    2. Deborah Kim Sy & Nobuhiro Hosoe, 2022. "Intended and Unintended Impacts of Minimum Wage Change: The Pivotal Role of Migration in the Philippines," GRIPS Discussion Papers 22-08, National Graduate Institute for Policy Studies.
    3. Neumark David, 2019. "The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns," German Economic Review, De Gruyter, vol. 20(3), pages 293-329, August.
    4. Florin Vadean & Stephen Allan, 2021. "The Effects of Minimum Wage Policy on the Long‐Term Care Sector in England," British Journal of Industrial Relations, London School of Economics, vol. 59(2), pages 307-334, June.
    5. Oluwasheyi S. Oladipo, 2020. "Migrant Workers' Remittances And Economic Growth: A Time Series Analysis," Journal of Developing Areas, Tennessee State University, College of Business, vol. 54(4), pages 75-88, October-D.
    6. David Neumark & Peter Shirley, 2022. "Myth or measurement: What does the new minimum wage research say about minimum wages and job loss in the United States?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 384-417, October.
    7. Popp, Martin, 2024. "Minimum Wages in Concentrated Labor Markets," IZA Discussion Papers 17357, Institute of Labor Economics (IZA).
    8. Ying Liang, 2024. "Firms' Risk Adjustments to Minimum Wage: Financial Leverage and Labor Share Trade-off," Papers 2408.03659, arXiv.org.
    9. Efobi, Uchenna & Asongu, Simplice & Okafor, Chinelo & Tchamyou, Vanessa & Tanankem, Belmondo, 2016. "Diaspora Remittance Inflow, Financial Development and the Industrialisation of Africa," MPRA Paper 76121, University Library of Munich, Germany.
    10. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09i8hjg0kpi is not listed on IDEAS
    11. Hiroyuki TAGUCHI & Ni LAR, 2017. "Emigrant’s remittances, Dutch Disease and capital accumulation: The case of Mekong countries," Journal of Economics Bibliography, EconSciences Journals, vol. 4(4), pages 295-306, December.
    12. David Card, 2022. "Design-Based Research in Empirical Microeconomics," American Economic Review, American Economic Association, vol. 112(6), pages 1773-1781, June.
    13. Caliendo, Marco & Wittbrodt, Linda, 2022. "Did the minimum wage reduce the gender wage gap in Germany?," Labour Economics, Elsevier, vol. 78(C).
    14. José Azar & Emiliano Huet & Ioana Marinescu & Bledi Taska & Till von, 2024. "Minimum Wage Employment Effects and Labour Market Concentration," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(4), pages 1843-1883.
    15. Simplice Asongu & Nicholas Biekpe & Vanessa Tchamyou, 2019. "Remittances, ICT and doing business in Sub-Saharan Africa," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 46(1), pages 35-54, January.
    16. Bayangos, V.B. & Jansen, K., 2010. "Remittances and competitiveness," ISS Working Papers - General Series 18701, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    17. Rao, B. Bhaskara & Hassan, Gazi Mainul, 2011. "A panel data analysis of the growth effects of remittances," Economic Modelling, Elsevier, vol. 28(1), pages 701-709.
    18. Carrieri, Vincenzo & Madio, Leonardo & Principe, Francesco, 2019. "Light cannabis and organized crime: Evidence from (unintended) liberalization in Italy," European Economic Review, Elsevier, vol. 113(C), pages 63-76.
    19. Muntasir Murshed & Seemran Rashid, 2020. "An Empirical Investigation of Real Exchange Rate Responses to Foreign Currency Inflows: Revisiting the Dutch Disease Phenomenon in South Asia," The Economics and Finance Letters, Conscientia Beam, vol. 7(1), pages 23-46.
    20. Robayo,Monica & Terskaya,Anastasia & Koettl-Brodmann,Stefanie, 2020. "Ex-ante Evaluation of the Impact of Increases in Minimum Wages on Labor Market Outcomes in Kosovo," Policy Research Working Paper Series 9357, The World Bank.
    21. Pablo Aguilar Perez, 2024. "Global Spillovers of US Monetary Policy: New Insights from the Remittance Channel," Working Papers hal-04706954, HAL.

    More about this item

    Keywords

    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    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:ags:pugtwp:333454. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/gtpurus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.