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Minimum Wages and Poverty in Developing Countries: Some Evidence

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  • Nora Lustig
  • Darryl McLeod

Abstract

This paper examines the relationship between minimum wages and poverty in developing countries. We regress changes in poverty indicators for a group of developing countries on minimum wage changes, changes in public spending, human capital investment and other variables associated with changes in poverty. We find that higher minimum wages are associated with lower levels of poverty. This result is replicated across a range of poverty measures and country groupings. Higher minimum wages are also associated with higher unemployment, so the potential reduction in poverty is not costless from an efficiency point of view.

Suggested Citation

  • Nora Lustig & Darryl McLeod, 1996. "Minimum Wages and Poverty in Developing Countries: Some Evidence," Discussion Papers 125, Brookings Institution International Economics.
  • Handle: RePEc:wop:briedp:125
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    File URL: http://apps89.brookings.edu/views/papers/bdp/BDP125/Bdp125.pdf
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    Cited by:

    1. Fields, Gary S. & Kanbur, Ravi, 2005. "Minimum Wages and Poverty," Working Papers 127086, Cornell University, Department of Applied Economics and Management.
    2. Chris Manning & Kurnya Roesad, 2007. "The Manpower Law of 2003 and its implementing regulations: Genesis, key articles and potential impact," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 43(1), pages 59-86.

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