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Minimum Wage and Job Mobility

Author

Listed:
  • Céspedes, Nikita

    (Banco Central de Reserva del Perú
    PUCP)

  • Sánchez, Alan

    (GRADE)

Abstract

We study the effects of the minimum wage in over employment and income by considering a monthly database that captures seven minimum wage changes registered between 2002 and 2011. We estimate that about 1 million workers have an income by main occupation in the neighbourhood of the minimum wage. We found that the minimum wage-income elasticity is statistically significant; the evidence also suggests that those who receive low incomes and those working in small businesses are the most affected by increases in the minimum wage. Employment effects are monotonically decreasing in absolute terms by firm size: moderate in big firms and higher in small firms. Results are robust when assessing the job-to-job transitions. Finally, we present evidence that supports the hypothesis that the minimum wage in Peru is correlated with income. The movement of income distribution in the context of changes in the minimum wage as well as the results provided by a model that captures the drivers of income justify this result.

Suggested Citation

  • Céspedes, Nikita & Sánchez, Alan, 2013. "Minimum Wage and Job Mobility," Working Papers 2013-012, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2013-012
    as

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    References listed on IDEAS

    as
    1. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," Working Papers 680, Princeton University, Department of Economics, Industrial Relations Section..
    2. Gerard J. van den Berg, 2003. "Multiple Equilibria and Minimum Wages in Labor Markets with Informational Frictions and Heterogeneous Production Technologies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1337-1357, November.
    3. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    4. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    5. David Card, 1992. "Do Minimum Wages Reduce Employment? A Case Study of California, 1987–89," ILR Review, Cornell University, ILR School, vol. 46(1), pages 38-54, October.
    6. David Neumark & William Wascher, 2006. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," NBER Working Papers 12663, National Bureau of Economic Research, Inc.
    7. David Neumark & William Wascher, 1992. "Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws," ILR Review, Cornell University, ILR School, vol. 46(1), pages 55-81, October.
    8. Meyer, Robert H & Wise, David A, 1983. "Discontinuous Distributions and Missing Persons: The Minimum Wage and Unemployed Youth," Econometrica, Econometric Society, vol. 51(6), pages 1677-1698, November.
    9. Peter F. Orazem & J. Peter Mattila, 2002. "Minimum Wage Effects on Hours, Employment, and Number of Firms: The Iowa Case," Journal of Labor Research, Transaction Publishers, vol. 23(1), pages 3-23, January.
    10. Jose Rodriguez & Minoru Higa, 2010. "Informalidad, empleo y productividad," Documentos de Trabajo / Working Papers 2010-282, Departamento de Economía - Pontificia Universidad Católica del Perú.
    11. Jaramillo, Miguel & Lopez, Kristian, 2006. "¿Cómo se ajusta el mercado de trabajo ante cambios en el salario mínimo en el Perú?: una evaluación de la experiencia de la última década," Working Papers 37728, Group for the Analysis of Development (GRADE).
    12. 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.
    13. Pereira, Sonia C., 2003. "The impact of minimum wages on youth employment in Portugal," European Economic Review, Elsevier, vol. 47(2), pages 229-244, April.
    14. Michele Campolieti & Tony Fang & Morley Gunderson, 2005. "Minimum wage impacts on youth employment transitions, 1993-1999," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 81-104, February.
    15. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," ILR Review, Cornell University, ILR School, vol. 46(1), pages 22-37, October.
    16. Céspedes, Nikita, 2006. "Efectos del salario mínimo en el mercado laboral peruano," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 13.
    17. Céspedes, Nikita & Gutiérrez, Ana Paola & Belapatiño, Vanessa, 2013. "Determinantes de la duración del desempleo en una economía con alta informalidad," Working Papers 2013-022, Banco Central de Reserva del Perú.
    18. Miguel Jaramillo Baanante, 2012. "Ajustes del mercado laboral peruano ante cambios en el salario mínimo: la experiencia de la década del 2000," Capítulos de Libros PUCP / Chapters of PUCP books, in: Cecilia Garavito & Ismael Muñoz (ed.), EMPLEO Y PROTECCIÓN SOCIAL, edition 1, chapter 11, pages 357-402, Fondo Editorial - Pontificia Universidad Católica del Perú.
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    20. Del Valle, Marielle, 2009. "Impacto del ajuste de la Remuneración Mínima Vital sobre el empleo y la informalidad," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 16, pages 83-102.
    21. Gerard J. van den Berg & Geert Ridder, 1998. "An Empirical Equilibrium Search Model of the Labor Market," Econometrica, Econometric Society, vol. 66(5), pages 1183-1222, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Nikita Céspedes & María E. Aquije & Alan Sánchez & Rafael Vera Tudela, 2016. "Productividad sectorial en el Perú: un análisis a nivel de firmas," Chapters of Books, in: Nikita Céspedes & Pablo Lavado & Nelson Ramírez Rondán (ed.), Productividad en el Perú: medición, determinantes e implicancias, edition 1, volume 1, chapter 3, pages 70-92, Fondo Editorial, Universidad del Pacífico.
    2. Nikita Céspedes & Nelson Ramirez-Rondán, 2014. "Total Factor Productivity Estimation in Peru: Primal and Dual Approaches," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 37(73), pages 9-39.
    3. Céspedes, Nikita & Rendón, Silvio, 2012. "La elasticidad de oferta laboral de Frisch en economías con alta movilidad laboral," Working Papers 2012-017, Banco Central de Reserva del Perú.
    4. Nikita Céspedes & Maria E. Aquije & Alan Sánchez & Rafael Vera-Tudela, 2014. "Productividad y tratados de libre comercio a nivel de empresas en Perú," Working Papers 27, Peruvian Economic Association.

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    More about this item

    Keywords

    Minimum wage; Labor mobility; Income dynamics; Informality;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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