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Evidence on the impact of minimum wage laws in an informal sector: Domestic workers in South Africa

  • Taryn Dinkelman
  • Vimal Ranchhod

    ()

    (SALDRU, School of Economics, University of Cape Town)

What happens when a previously uncovered labor market is regulated? We exploit the introduction of a minimum wage in South Africa and variation in the intensity of this law to identify increases in wages and formal contract coverage, and no significant effects on employment on the intensive or extensive margins for domestic workers. These large, partial responses to the law are somewhat surprising, given the lack of monitoring and enforcement in this informal sector. We interpret these changes as evidence that external sanctions are not necessary for new labor legislation to have a significant impact on informal sectors of developing countries, at least in the short-run.

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Paper provided by Southern Africa Labour and Development Research Unit, University of Cape Town in its series SALDRU Working Papers with number 44.

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Date of creation: Jul 2010
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Handle: RePEc:ldr:wpaper:44
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