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Wage Inequality in Developing Countries: Market Forces or Government Intervention

  • Daniel Miles

    ()

    (Departamento de Economía Aplicada, Universidad de Vigo.)

  • Máximo Rossi

    ()

    (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Wage dispersion had increased significantly in developing countries, despite the openness to trade of these economies. Research on this issue, using approaches valid under the assumption of conventional demand-supply competitive framework, conclude that this observed increase in wage inequality is a consequence of an increase in skills premium. In this paper we show that this conclusion could be bias if governement intervention is not taken into account. Here we find that in Uruguay most of the increase in wage dispersion could be explain by a significant increase in public wages and a decrease of minimum wage. In addition, we observe that the the impact of these intervetions are different depending on the degree of concentration of population and economic activity.

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File URL: http://decon.edu.uy/publica/2001/Doc1001.pdf
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Paper provided by Department of Economics - dECON in its series Documentos de Trabajo (working papers) with number 1001.

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Length: 41 pages
Date of creation: Aug 2001
Date of revision:
Handle: RePEc:ude:wpaper:1001
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  1. Snower, Dennis J., 1999. "Causes of Changing Earnings Inequality," IZA Discussion Papers 29, Institute for the Study of Labor (IZA).
  2. Adriana Cassoni & Steven G. Allen & Gaston J. Labadie, 2000. "Unions and Employment in Uruguay," Research Department Publications 3092, Inter-American Development Bank, Research Department.
    • Adriana Cassoni & Steven G. Allen & Gaston J. Labadie, 2004. "Unions and Employment in Uruguay," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 435-496 National Bureau of Economic Research, Inc.
  3. Simon, Curtis J., 1998. "Human Capital and Metropolitan Employment Growth," Journal of Urban Economics, Elsevier, vol. 43(2), pages 223-243, March.
  4. Nicole M. Fortin & Thomas Lemieux, 1997. "Institutional Changes and Rising Wage Inequality: Is There a Linkage?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 75-96, Spring.
  5. Francis Green & Andy Dickerson & Jorge Saba Arbache, 2000. "A Picture of Wage Inequality and the Allocation of Labour Through a Period of Trade Liberalisation: The Case of Brazil," Studies in Economics 0013, School of Economics, University of Kent.
  6. MacIsaac, Donna & Rama, Martin, 1997. "Determinants of Hourly Earnings in Ecuador: The Role of Labor Market Regulations," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S136-65, July.
  7. Topel, Robert H, 1994. "Regional Labor Markets and the Determinants of Wage Inequality," American Economic Review, American Economic Association, vol. 84(2), pages 17-22, May.
  8. Dolado, Juan J. & Felgueroso, Florentino & Jimeno, Juan F., 1997. "The effects of minimum bargained wages on earnings: Evidence from Spain," European Economic Review, Elsevier, vol. 41(3-5), pages 713-721, April.
  9. Beyer, Harald & Rojas, Patricio & Vergara, Rodrigo, 1999. "Trade liberalization and wage inequality," Journal of Development Economics, Elsevier, vol. 59(1), pages 103-123, June.
  10. Moene, Karl Ove & Wallerstein, Michael, 1997. "Pay Inequality," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 403-30, July.
  11. Levernier, William & Partridge, Mark D. & Rickman, Dan S., 1998. "Differences in Metropolitan and Nonmetropolitan U.S. Family Income Inequality: A Cross-County Comparison," Journal of Urban Economics, Elsevier, vol. 44(2), pages 272-290, September.
  12. Dani Rodrik, 1998. "Democracies Pay Higher Wages," NBER Working Papers 6364, National Bureau of Economic Research, Inc.
  13. Peter Rupert & Mark E. Schweitzer & Eric Severance-Lossin & Erin Turner, 1996. "Earnings, education and experience," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 2-12.
  14. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  15. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November.
  16. 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 S102-35, July.
  17. Mwabu, Germano & Schultz, T Paul, 1996. "Education Returns across Quantiles of the Wage Function: Alternative Explanations for Returns to Education by Race in South Africa," American Economic Review, American Economic Association, vol. 86(2), pages 335-39, May.
  18. Murphy, Kevin M & Welch, Finis, 1992. "The Structure of Wages," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 285-326, February.
  19. A. L. Robb & L. Magee & J. B. Burbidge, 1992. "Kernel Smoothed Consumption-Age Quantiles," Canadian Journal of Economics, Canadian Economics Association, vol. 25(3), pages 669-80, August.
  20. Peter Gottschalk, 1997. "Inequality, Income Growth, and Mobility: The Basic Facts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 21-40, Spring.
  21. Robert H. Topel, 1997. "Factor Proportions and Relative Wages: The Supply-Side Determinants of Wage Inequality," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 55-74, Spring.
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