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Minimum Wages and Earnings Inequality in Urban Mexico. Revisiting the Evidence

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  • Mariano Bosch
  • Marco Manacorda

Abstract

This paper explores the contribution of the minimum wage to the well documented rise in earnings inequality in Mexico between the late 1980 and the late 1990s. In contrast to the view that sees minimum wages as an ineffective redistributive tool in developing countries, we find that the deterioration in the real bite of the minimum wage is responsible for the entire rise in inequality at the bottom of the distribution. Our result challenges the widespread perception that trade induced shocks are the single most important factor behind the recent rise in earnings inequality in several less developed economies.

Suggested Citation

  • Mariano Bosch & Marco Manacorda, 2008. "Minimum Wages and Earnings Inequality in Urban Mexico. Revisiting the Evidence," CEP Discussion Papers dp0880, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0880
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    Cited by:

    1. repec:lrc:lareco:v:5:y:2017:i:3:p:26-30 is not listed on IDEAS
    2. Gindling, T.H. & Terrell, Katherine, 2009. "Minimum wages, wages and employment in various sectors in Honduras," Labour Economics, Elsevier, vol. 16(3), pages 291-303, June.
    3. Chiara Binelli & Orazio Attanasio, 2010. "Mexico in the 1990s: the Main Cross-Sectional Facts," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 238-264, January.
    4. Sell, Friedrich L. & Öllinger, Michael, 2017. "On the distributional effects of minimum wages: A note," Working Papers in Economics 2017,3, Bundeswehr University Munich, Economic Research Group.

    More about this item

    Keywords

    Minimum Wage; Inequality; Informality; Mexico;

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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