IDEAS home Printed from
   My bibliography  Save this paper

The Labor Impact of Minimum Wages: A Method for Estimating the Effect in Emerging Economies using Chilean Panel Data


  • Nicolás Grau
  • Oscar Landerretche


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.

Suggested Citation

  • Nicolás Grau & Oscar Landerretche, 2011. "The Labor Impact of Minimum Wages: A Method for Estimating the Effect in Emerging Economies using Chilean Panel Data," Working Papers wp329, University of Chile, Department of Economics.
  • Handle: RePEc:udc:wpaper:wp329

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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, March.
    6. Lemos, Sara, 2004. "The Effect of the Minimum Wage on Prices," IZA Discussion Papers 1072, Institute for the Study of Labor (IZA).
    7. 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.
    Full references (including those not matched with items on IDEAS)


    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. La (ir)relevancia del salario mínimo en Chile
      by Dany Jaimovich - Bakary Baludin in Development Therapy on 2012-07-18 17:40:00


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Miranda Pinto, Jorge, 2013. "Estabilidad de la demanda de trabajo y efecto del salario minimo sobre el Empleo: El caso Chileno
      [Labor demand stability and the minimum wage effect on employment: The Chilean evidence]
      ," MPRA Paper 60333, University Library of Munich, Germany, revised 30 Nov 2014.
    2. Gonzalo Castex H., 2012. "Aumento del Salario Mínimo y sus Efectos sobre el Mercado Laboral," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 15(2), pages 117-129, August.
    3. Malena Arcidiácono, 2015. "Salario Mínimo y Distribución salarial: Evidencia para Argentina 2003 – 2013," CEDLAS, Working Papers 0192, CEDLAS, Universidad Nacional de La Plata.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. 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: (Mohit Karnani). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.