The Labor Impact of Minimum Wages: A Method for Estimating the Effect in Emerging Economies using Chilean Panel Data
We develop and use a statistical matching technique to construct a panel data set from the Chilean National Employment Survey; and then use this panel to test the short term impacts of minimum wage increases during the 1996-2005 period.We estimate wage increase effects for the treated group (people earning wages between ex ante an ex post minimum wages), the hours worked and the employment effects for this group. We also estimate the effect on the proba- bility of obtaining a job for a theoretical treated group of unemployed and inactive workers constructed by estimating their likely wage in the case that they found one. We then estimate the integral of these three effects (wage increase, wage loss and lower probability of obtaining a job). We find that minimum wage increases do have a significant impact on the wages of the treated group, hence the suspicion that they are somehow made irrelevant by informal practices in Chilean labor markets seems to be unfunded. We find that there is a significant negative effect on the probability of staying employed, a negative effect on hours worked and a signifi- cant negative effect on the probability of finding the job. We find that the integral of the three effects is positive and has statistical significance. We conclude that, in general, minimum wage increases in Chile during the aforementioned period have increased the real income of treated and potentially treated workers. However, we also find that there is a redistribution of income among these workers in favor of currently employed workers. We submit our results to several robustness checks including a variety of definitions of income and wages, a continuous changing control group, a “dif-in-dif” approach and a pressure and distance.approach. We conclude that, if anything, minimum wage increases have generated real income redistribution towards the treated workers as well as among them in Chile.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Claudio Sapelli, 1996. "Modelos para Pensar el Mercado de Trabajo: Una Revisión de la Literatura Chilena," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 33(99), pages 251-276.
- Stewart, Mark B., 2002.
"The Impact of the Introduction of the UK Minimum Wage on the Employment Probabilities of Low Wage Workers,"
Royal Economic Society Annual Conference 2002
169, Royal Economic Society.
- Mark B. Stewart, 2004. "The Impact of the Introduction of the U.K. Minimum Wage on the Employment Probabilities of Low-Wage Workers," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 67-97, 03.
- Stewart, Mark B., 2002. "The Impact Of The Introduction Of The Uk Minimum Wage On The Employment Probabilities Of Low Wage Workers," The Warwick Economics Research Paper Series (TWERPS) 630, University of Warwick, Department of Economics.
- Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
- Richard Dickens & Alan Manning, 2002.
"Has The National Minimum Wage Reduced UK Wage Inequality?,"
CEP Discussion Papers
dp0533, Centre for Economic Performance, LSE.
- Richard Dickens & Alan Manning, 2004. "Has the national minimum wage reduced UK wage inequality?," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 167(4), pages 613-626.
- Richard Dickens & Alan Manning, 2002. "Has the national minimum wage reduced UK wage inequality?," LSE Research Online Documents on Economics 20079, London School of Economics and Political Science, LSE Library.
- John M. Abowd & Francis Kramarz & Thomas Lemieux & David N. Margolis, 1997.
"Minimum Wages and Youth Employment in France and the United States,"
NBER Working Papers
6111, National Bureau of Economic Research, Inc.
- John M. Abowd & Francis Kramarz & Thomas Lemieux & David N. Margolis, 2000. "Minimum Wages and Youth Employment in France and the United States," NBER Chapters, in: Youth Employment and Joblessness in Advanced Countries, pages 427-472 National Bureau of Economic Research, Inc.
- Sara lemos, 2004.
"The Effect of the Minimum Wage on Prices,"
Discussion Papers in Economics
04/7, Department of Economics, University of Leicester.
- Janet Currie & Bruce Fallick, 1993.
"The Minimum Wage and the Employment of Youth: Evidence from the NLSY,"
NBER Working Papers
4348, National Bureau of Economic Research, Inc.
- Janet Currie & Bruce C. Fallick, 1996. "The Minimum Wage and the Employment of Youth Evidence from the NLSY," Journal of Human Resources, University of Wisconsin Press, vol. 31(2), pages 404-428.
When requesting a correction, please mention this item's handle: RePEc:udc:wpaper:wp329. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rafael Carranza)
If references are entirely missing, you can add them using this form.