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Minimum Wage: Empirical evidence for Uruguay

Author

Listed:
  • Fernando Borraz

    () (Banco Central del Uruguay)

  • Nicolás González

    () (Universidad de Montevideo (Uruguay))

Abstract

Since the end of the nineties, as most of Latin American countries, Uruguay has observed a trend toward wage inequality. In order to explain the increasing inequality prior research focused on several issues such as trade openness, technological change and labor policies. In this research we focus on minimum wage and its effects on wage structure, applying the DiNardo, Fortín and Lemieux semi-parametric approach which implies counterfactual exercises assuming zero employment effect. For the period 1986-2003, where minimum wage decreases by 66% in real terms (3.7% the yearly average), we find that it contributes slightly to wage inequality only for males. For the period 2004-2009, where minimum wage increases by 153% (25.4% the yearly average), we find that it contributes to decrease wage inequality for females. These results enable us to conclude: i) it is not clear that the erosion of minimum wage during the nineties is responsible for the increase in wage inequality; and ii) the re-introduction of minimum wage helps to decrease only female wage inequality. Nothing can be said about efficiency of this policy and further research is required on the issue of employment effect.

Suggested Citation

  • Fernando Borraz & Nicolás González, 2009. "Minimum Wage: Empirical evidence for Uruguay," Documentos de trabajo 2009003, Banco Central del Uruguay.
  • Handle: RePEc:bku:doctra:2009003
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    File URL: http://www.bcu.gub.uy/Estadisticas-e-Indicadores/Documentos%20de%20Trabajo/3.2009.pdf
    File Function: First version, 2009
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    References listed on IDEAS

    as
    1. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    2. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    3. Melanie Khamis, 2013. "Does the minimum wage have a higher impact on the informal than on the formal labour market? Evidence from quasi-experiments," Applied Economics, Taylor & Francis Journals, vol. 45(4), pages 477-495, February.
    4. John DiNardo & Justin L. Tobias, 2001. "Nonparametric Density and Regression Estimation," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 11-28, Fall.
    5. Diego Angel-Urdinola & Quentin Wodon, 2005. "Do changes in the minimun wage affect younger and older workers differently? Evidence for Paraguay using semi-parametric methods," Estudios de Economia, University of Chile, Department of Economics, vol. 32(1 Year 20), pages 25-38, June.
    6. Richard Dickens & Alan Manning, 2004. "Has the national minimum wage reduced UK wage inequality?," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 167(4), pages 613-626.
    7. Xulia GonzÂlez & Daniel Miles, 2001. "Wage inequality in a developing country: decrease in minimum wage or increase in education returns," Empirical Economics, Springer, vol. 26(1), pages 135-148.
    8. Lemos, Sara, 2009. "Minimum wage effects in a developing country," Labour Economics, Elsevier, vol. 16(2), pages 224-237, April.
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    Citations

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    Cited by:

    1. Jain, Sanjay & Majumdar, Sumon & Mukand, Sharun W, 2014. "Walk the line: Conflict, state capacity and the political dynamics of reform," Journal of Development Economics, Elsevier, vol. 111(C), pages 150-166.
    2. Alessandra Scalioni Brito & Miguel Foguel & Celia Kerstenetzky, 2018. "The Contribution Of Minimum Wage Valorization Policy To The Decline In Household Income Inequality In Brazil: A Decomposition Approach," Anais do XLIV Encontro Nacional de Economia [Proceedings of the 44th Brazilian Economics Meeting] 217, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

    More about this item

    Keywords

    Minimum wage; labor demand; Uruguay;

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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