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

  • Taryn Dinkelman

    (Princeton University)

  • Vimal Ranchhod

    (University of Cape Town)

What happens when a previously uncovered labor market is regulated? We exploit the in- troduction 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 signi cant e ects 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 signi cant impact on informal sectors of developing countries, at least in the short-run.

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Paper provided by Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies. in its series Working Papers with number 1254.

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Date of creation: Jul 2010
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Handle: RePEc:pri:rpdevs:dinkelman_ranchhod_minwages_0710
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