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Minimum Wages, Inequality and Globalization


  • Gindling, T. H.

    () (University of Maryland, Baltimore County)

  • Terrell, Katherine

    (University of Michigan)


This paper contributes to our understanding of the impact of institutions on incomes of workers in developing countries by rigorously addressing the question as to whether changes in minimum wages can change the inequality of the distribution of earnings. More specifically, we analyze whether changes in Costa Rica’s complex institution of multiple minimum wages in the 1980s and 1990s acted as a countervailing force to the unequalizing effect of globalization. Using annual data on workers from the 1987-1997 household surveys, it is shown that changes in the legal minimum wages did indeed have an effect on wage inequality and that these changes would not have been captured using the simple interpretation of minimum wages found in much of the literature.

Suggested Citation

  • Gindling, T. H. & Terrell, Katherine, 2004. "Minimum Wages, Inequality and Globalization," IZA Discussion Papers 1160, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1160

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    References listed on IDEAS

    1. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-245, May.
    2. Gindling, T. H. & Robbins, Donald, 2001. "Patterns and Sources of Changing Wage Inequality in Chile and Costa Rica During Structural Adjustment," World Development, Elsevier, vol. 29(4), pages 725-745, April.
    3. Eli Bekman & John Bound & Stephen Machin, 1998. "Implications of Skill-Biased Technological Change: International Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1245-1279.
    4. Bell, Linda A, 1997. "The Impact of Minimum Wages in Mexico and Colombia," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 102-135, July.
    5. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
    6. Robbins, Donald & Gindling, T H, 1999. "Trade Liberalization and the Relative Wages for More-Skilled Workers in Costa Rica," Review of Development Economics, Wiley Blackwell, vol. 3(2), pages 140-154, June.
    7. Cortez, Willy W., 2001. "What is Behind Increasing Wage Inequality in Mexico?," World Development, Elsevier, vol. 29(11), pages 1905-1922, November.
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    Cited by:

    1. Gindling, T.H. & Terrell, Katherine, 2007. "The effects of multiple minimum wages throughout the labor market: The case of Costa Rica," Labour Economics, Elsevier, vol. 14(3), pages 485-511, June.
    2. Arias, Omar & Blom, Andreas & Bosch, Mariano & Cunningham, Wendy & Fiszbein, Ariel & Lopez Acevedo, Gladys & Maloney, William & Saavedra, Jaime & Sanchez-Paramo, Carolina & Santamaria, Mauricio & Siga, 2005. "Pending issues in protection, productivity growth, and poverty reduction," Policy Research Working Paper Series 3799, The World Bank.
    3. TH Gindling & Juan Diego Trejos, 2005. "Accounting for Changing Earnings Inequality in Costa Rica, 1980-99," Journal of Development Studies, Taylor & Francis Journals, vol. 41(5), pages 898-926.
    4. Weller, Jürgen, 2007. "La flexibilidad del mercado de trabajo en América Latina y el Caribe. Aspectos del debate, alguna evidencia y políticas," Macroeconomía del Desarrollo 61, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).

    More about this item


    wages; employment; minimum wages; Costa Rica;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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