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Minimum wages and the wage distribution in Estonia

Author

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  • Simona Ferraro
  • Jaanika Merikull
  • Karsten Staehr

Abstract

This paper analyses how the statutory minimum wage has affected the wage distribution in Estonia, a country with virtually little collective bargaining and relatively large wage inequality. The computations follow Lee (1999) but the effects of the minimum wage are identified by the degree to which the minimum wage binds in different labour markets defined by time, region and sector. The minimum wage affects wages in the lower tail of the distribution, but the effects are most pronounced up to the 20th percentile and then decline markedly as the wage approaches the median wage. The minimum wage is of greater importance for women than for men. Interestingly, the importance of the minimum wage for the lower tail of the wage distribution was smaller during the global financial crisis than before or after the crisis.

Suggested Citation

  • Simona Ferraro & Jaanika Merikull & Karsten Staehr, 2016. "Minimum wages and the wage distribution in Estonia," Bank of Estonia Working Papers wp2016-6, Bank of Estonia, revised 19 Aug 2016.
    • Handle: RePEc:eea:boewps:wp2016-6
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    2. Katalin Bodnár & Ludmila Fadejeva & Stefania Iordache & Liina Malk & Desislava Paskaleva & Jurga Pesliakaitė & Nataša Todorović Jemec & Peter Tóth & Robert Wyszyński, 2018. "How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-30, December.
    3. Jaanika Meriküll & Maryna Tverdostup, 2020. "The Gap That Survived The Transition: The Gender Wage Gap Over Three Decades In Estonia," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 127, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    4. Xiaoshi Zhou & Wanglin Ma & Gucheng Li & Huanguang Qiu, 2020. "Farm machinery use and maize yields in China: an analysis accounting for selection bias and heterogeneity," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(4), pages 1282-1307, October.
    5. Meriküll, Jaanika & Tverdostup, Maryna, 2023. "The gap that survived the transition: The gender wage gap in Estonia over three decades," Economic Systems, Elsevier, vol. 47(3).
    6. Garcia-Louzao, Jose & Tarasonis, Linas, 2023. "Wage and Employment Impact of Minimum Wage: Evidence from Lithuania," Journal of Comparative Economics, Elsevier, vol. 51(2), pages 592-609.
    7. Paul Redmond & Karina Doorley & Seamus McGuinness, 2021. "The impact of a minimum wage change on the distribution of wages and household income," Oxford Economic Papers, Oxford University Press, vol. 73(3), pages 1034-1056.
    8. Konstantins Benkovskis & Ludmila Fadejeva & Anna Pluta & Anna Zasova, 2023. "Keeping the best of two worlds: Linking CGE and microsimulation models for policy analysis," Working Papers 2023/01, Latvijas Banka.
    9. Jaan Masso & Vladyslav Soloviov & Kerly Espenberg & Inta Mierina, 2019. "Social convergence of the Baltic states within the enlarged EU: Is limited social dialogue an impediment?," Chapters, in: Daniel Vaughan-Whitehead (ed.), Towards Convergence in Europe, chapter 2, pages 35-77, Edward Elgar Publishing.
    10. Masso, Jaan & Meriküll, Jaanika & Vahter, Priit, 2022. "The role of firms in the gender wage gap," Journal of Comparative Economics, Elsevier, vol. 50(2), pages 454-473.
    11. Laporšek, Suzana & Orazem, Peter F. & Vodopivec, Milan & Vodopivec, Matija, 2021. "Winners and losers after 25 years of transition: Decreasing wage inequality in Slovenia," Economic Systems, Elsevier, vol. 45(2).
    12. Biljana Jovanovic & Nikola Naumovski, 2021. "Minimum wage reform and firms’ performance – evidence from North Macedonia," Working Papers 2021-02, National Bank of the Republic of North Macedonia.
    13. Eva Lajtkepová, 2020. "Distribution of Wages in the Regions of the Czech Republic," ACTA VSFS, University of Finance and Administration, vol. 14(2), pages 123-136.

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    More about this item

    Keywords

    inflation ex-post uncertainty; monetary policy; country effects; inflation forecasting;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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