IDEAS home Printed from https://ideas.repec.org/p/col/000118/001922.html
   My bibliography  Save this paper

A Minimum Wage Increase Can Have an Adverse Distributional Impact:The case of Colombia

Author

Listed:
  • Diego F. ANGEL-URDINOLA

Abstract

A rise in the minimum wage may contribute to decrease earnings inequality by promoting larger wage increases for workers in the low tail of the wage distribution, but it may also increase inequality by promoting layoffs. This paper uses a semiparametric model to analyze the impact on inequality of a 6.3 percent increase in the real minimum wage in Colombia between 1995 and 1999, a period of economic downturn. Simulations suggest that if the employment effects of the minimum wage increase are ignored, the underlying policy would contribute to reduce earnings inequality. On the contrary, by considering the drop in wages of those who lost their jobs, simulations suggest that the policy in question would increase earnings inequality under some assumptions about the employment elasticity of the minimum wage and the new level of earnings unemployed workers rely upon.

Suggested Citation

  • Diego F. ANGEL-URDINOLA, 2004. "A Minimum Wage Increase Can Have an Adverse Distributional Impact:The case of Colombia," Archivos de Economía 1922, Departamento Nacional de Planeación.
    • Handle: RePEc:col:000118:001922
    as

    Download full text from publisher

    File URL: https://colaboracion.dnp.gov.co/CDT/Estudios%20Econmicos/247.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Eduardo Wiesner, 2002. "Transferencias, incentivos y la endogenidad del gasto territorial," Archivos de Economía 11244, Departamento Nacional de Planeación.
    2. Juan Carlos ECHEVERRY GARZON & Andrés ESCOBAR ARANGO & César MERCHAN HERNANDEZ & Gabriel PIRAQUIVE GALEANO, 2001. "Elementos para el debate sobre una nueva reforma pensional en Colombia," Archivos de Economía 11243, Departamento Nacional de Planeación.
    3. Jairo Núnez & Roberto Steiner & Ximena Cadena & Renata Pardo, 2002. "¿Cuáles Colegios Ofrecen Mejor Educación En Colombia?," Documentos CEDE 3796, Universidad de los Andes, Facultad de Economía, CEDE.
    4. Thomas F. RUTHERFORD & Miles K. LIGHT & Gustavo Adolfo HERNANDEZ, 2002. "A dynamic general equilibrium model for tax policy analysis in Colombia," Archivos de Economía 1910, Departamento Nacional de Planeación.
    5. Diego F. ANGEL URDINOLA & Quentin WODON, 2003. "Relative labor supply and the gender wage Gap: Evidence for Colombia and the United States," Archivos de Economía 3452, Departamento Nacional de Planeación.
    6. Natalia Salazar Ferro & Diego Prada H., 2004. "El balance estructural del gobierno central en Colombia," Coyuntura Económica, Fedesarrollo, March.
    7. Fernando MESA PARRA, 2001. "Strategic Trade Policy and Exchange Rate Uncertainty," Archivos de Economía 3527, Departamento Nacional de Planeación.
    8. Diego F. Angel‐Urdinola & Quentin Wodon, 2006. "The Gender Wage Gap and Poverty in Colombia," LABOUR, CEIS, vol. 20(4), pages 721-739, December.
    9. Castro Carlos Alberto, 2001. "Eficiencia-X en el sector bancario colombiano," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, September.
    10. Alejandro GAVIRIA URIBE & Jairo Augusto NUÑEZ MENDEZ, 2003. "Evaluating the impact of SENA on earnings and Employment," Archivos de Economía 2646, Departamento Nacional de Planeación.
    11. Hernandez, Gustavo Adolfo & Light, Miles & Rutherford, Thomas, 2002. "A dynamic general equilibrium model for tax policy analysis in Colombia," MPRA Paper 28435, University Library of Munich, Germany.
    12. Jaime Andrés ESTRADA, 2002. "Optimal enforcement: Finding the right balance," Archivos de Economía 3302, Departamento Nacional de Planeación.
    13. Allan DRAZEN & Marcela ESLAVA, 2003. "The political business cycle in Colombia on the National and Regional level," Archivos de Economía 3616, Departamento Nacional de Planeación.
    14. Juan Carlos ECHEVERRY GARZON, 2002. "El siglo del modelo de desarrollo," Archivos de Economía 2552, Departamento Nacional de Planeación.
    15. Andrés ESCOBAR ARANGO & Gustavo Adolfo HERNANDEZ & Gabriel PIRAQUIVE & Juan Mauricio RAMIREZ, 2003. "Elementos para el análisis de incidencia tributaria," Archivos de Economía 2571, Departamento Nacional de Planeación.
    16. Ortega, Juan Ricardo & Piraquive, Gabriel Armando & Hernandez, Gustavo Adolfo & Soto, Carolina & Prada, Sergio & Ramirez, Juan Mauricio, 2000. "Incidencia fiscal de los incentivos tributarios [Fiscal Incidence of tax incentives]," MPRA Paper 14016, University Library of Munich, Germany.
    17. Francisco Javier Lasso, 2003. "Economías de escala en los hogares y la pobreza," Revista de Economía del Rosario, Universidad del Rosario, June.
    18. Carlos Pombo, 1994. "Comercio intraindustrial: el caso colombiano," Coyuntura Económica, Fedesarrollo, December.
    19. Diego F. Angel‐Urdinola & Quentin Wodon, 2004. "The Impact on Inequality of Raising the Minimum Wage: Gap‐narrowing and Reranking Effects," LABOUR, CEIS, vol. 18(2), pages 317-327, June.
    20. Miles Kenneth LIGHT & Thomas Fox RUTHERFORD, 2003. "Free Trade Area of the Americas. An impact Assessment for Colombia," Archivos de Economía 2744, Departamento Nacional de Planeación.
    21. Thomas F. Rutherford & Miles K. LIGHT, 2002. "A General Equilibrium Model for Tax Policy Analysis in Colombia: The MEGATAX Model," Archivos de Economía 11291, Departamento Nacional de Planeación.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Grimshaw, Damian., 2011. "What do we know about low wage work and low wage workers? : Analysing the definitions, patterns, causes and consequences in international perspective," ILO Working Papers 994648583402676, International Labour Organization.
    2. Enrique PINZON GARCIA & Oscar M. VALENCIA ARANA, 2006. "The Determinants of Colombian Firm´s Debt-Asset Ratio (1997-2003)," Archivos de Economía 3582, Departamento Nacional de Planeación.
    3. Maria Otilia Orozco, 2005. "Colombia's Higher Education Quality Control System and Potential for Further Development," Archivos de Economía 2139, Departamento Nacional de Planeación.
    4. Benassi, Chiara., 2011. "The implementation of minimum wage : challenges and creative solutions," ILO Working Papers 994629883402676, International Labour Organization.
    5. repec:ilo:ilowps:464858 is not listed on IDEAS
    6. Benassi, Chiara, 2011. "The implementation of minimum wage: Challenges and creative solutions," GLU Working Papers 12, Global Labour University (GLU).
    7. repec:ilo:ilowps:462988 is not listed 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. José Daniel REYES PENA, 2003. "The cost of disinflation in Colombia: -A sacrifice Ratio Approach-," Archivos de Economía 3579, Departamento Nacional de Planeación.
    2. Maria Otilia Orozco, 2005. "Colombia's Higher Education Quality Control System and Potential for Further Development," Archivos de Economía 2139, Departamento Nacional de Planeación.
    3. Enrique PINZON GARCIA & Oscar M. VALENCIA ARANA, 2006. "The Determinants of Colombian Firm´s Debt-Asset Ratio (1997-2003)," Archivos de Economía 3582, Departamento Nacional de Planeación.
    4. Diego F. Angel‐Urdinola & Quentin Wodon, 2004. "The Impact on Inequality of Raising the Minimum Wage: Gap‐narrowing and Reranking Effects," LABOUR, CEIS, vol. 18(2), pages 317-327, June.
    5. Diego F. ANGEL URDINOLA & Quentin WODON, 2003. "Relative labor supply and the gender wage Gap: Evidence for Colombia and the United States," Archivos de Economía 3452, Departamento Nacional de Planeación.
    6. Carlos Alberto CASTRO IRAGORRI, 2003. "Yet another lagging, coincident and leading index for the Colombian economy," Archivos de Economía 3785, Departamento Nacional de Planeación.
    7. Allan DRAZEN & Marcela ESLAVA, 2003. "The political business cycle in Colombia on the National and Regional level," Archivos de Economía 3616, Departamento Nacional de Planeación.
    8. Paula ACOSTA MARQUEZ, 2002. "Does corporate governance matter for developing countries? An overview of the Mexican case," Archivos de Economía 2380, Departamento Nacional de Planeación.
    9. Jaime Andrés ESTRADA, 2002. "Optimal enforcement: Finding the right balance," Archivos de Economía 3302, Departamento Nacional de Planeación.
    10. Thomas F. RUTHERFORD & Miles K. LIGHT & Gustavo Adolfo HERNANDEZ, 2002. "A dynamic general equilibrium model for tax policy analysis in Colombia," Archivos de Economía 1910, Departamento Nacional de Planeación.
    11. Mauricio SANTAMARÍA SALAMANCA, 2001. "External Trade, Skill, Technology and the recent increase of income inequality in Colombia," Archivos de Economía 2705, Departamento Nacional de Planeación.
    12. Fernando MESA PARRA, 2001. "Strategic Trade Policy and Exchange Rate Uncertainty," Archivos de Economía 3527, Departamento Nacional de Planeación.
    13. Gustavo Adolfo HERNANDEZ DIAZ, 2011. "Impuestos parafiscales y mercado laboral: Un análisis de Equilibrio General Computable," Archivos de Economía 8954, Departamento Nacional de Planeación.
    14. Takeda, Shiro, 2007. "The double dividend from carbon regulations in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 21(3), pages 336-364, September.
    15. Shiro Takeda & Toshi H. Arimura & Makoto Sugino, 2019. "Labor Market Distortions and Welfare-Decreasing International Emissions Trading," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(1), pages 271-293, September.
    16. Gómez-Plana Antonio G. & Latorre María C., 2019. "Digitalization, Multinationals and Employment: An Empirical Analysis of Their Causal Relationships," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(3), pages 399-439, June.
    17. Omer Ozak & Oscar Mauricio Valencia, 2002. "Impacto macroeconómico y distributivo del impuesto de seguridad democrática," Archivos de Economía 11294, Departamento Nacional de Planeación.
    18. Gustavo Hernández, 2012. "Payroll Taxes and the Labor Market: A Computable General Equilibrium Analysis," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 49(1), pages 99-123, May.
    19. Daniela Santos Cárdenas, 2017. "Faldas por pantalones: las obreras, la brecha salarial, y el sindicalismo femenino en la industria en Colombia en 1945," Documentos CEDE 15669, Universidad de los Andes, Facultad de Economía, CEDE.
    20. Sara de la Rica; Luz Karime Abadía Alvarado & Luz Karime Abadía Alvarado, 2011. "Changes in the Gender Wage Gap and the Role of Education and Other Job Characteristics: Colombia 1994-2010," Vniversitas Económica, Universidad Javeriana - Bogotá, vol. 0(0), pages 1-36, August.

    More about this item

    Keywords

    Salario Mínimo;

    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:col:000118:001922. 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: Carlos Fernando Rincon Rojas (email available below). General contact details of provider: https://edirc.repec.org/data/dnpgvco.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.