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The Minimum Wage Puzzle in Less Developed Countries: Reconciling Theory and Evidence

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  • Mr. Edward F Buffie
  • Mr. Christopher S Adam

Abstract

We show that a dynamic general equilibrium model with efficiency wages and endogenous capital accumulation in both the formal and (non-agricultural) informal sectors can explain the full range of confounding stylized facts associated with minimum wage laws in less developed countries.

Suggested Citation

  • Mr. Edward F Buffie & Mr. Christopher S Adam, 2020. "The Minimum Wage Puzzle in Less Developed Countries: Reconciling Theory and Evidence," IMF Working Papers 2020/023, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2020/023
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