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Minimum Wages and Poverty in Developing Countries : Some Empirical Evidence

Author

Listed:
  • Lustig, N.
  • Mcleod, D.

Abstract

This paper examines the relationship between minimum wages and poverty in developing countries. We regress changes in poverty indicators for a group of developing countries on minimum wage changes, changes in public spending, human capital investment and other variables associated with changes in poverty. We find that higher minimum wages are associated with lower levels of poverty. This result is replicated across a range of poverty measures and country groupings. Higher minimum wages are also associated with higher unemployment, so the potential reduction in poverty is not costless from an efficiency point of view.

Suggested Citation

  • Lustig, N. & Mcleod, D., 1996. "Minimum Wages and Poverty in Developing Countries : Some Empirical Evidence," Papers 125, Brookings Institution - Working Papers.
  • Handle: RePEc:fth:brooki:125
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    More about this item

    Keywords

    MINIMUM WAGE ; POVERTY ; DEVELOPING COUNTRIES;

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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