IDEAS home Printed from https://ideas.repec.org/a/eee/labeco/v18y2011is1ps45-s59.html
   My bibliography  Save this article

The impact of minimum wages on wages, work and poverty in Nicaragua

Author

Listed:
  • Alaniz, Enrique
  • Gindling, T.H.
  • Terrell, Katherine

Abstract

In this paper we use an individual- and household-level panel data set to study the impact of changes in legal minimum wages on a host of labor market outcomes including: a) wages and employment, b) transitions of workers across jobs (in the covered and uncovered sectors) and employment status (unemployment and out of the labor force), and c) transitions into and out of poverty. We find that changes in the legal minimum wage affect only those workers whose initial wage (before the change in minimum wages) is close to the minimum. For example, increases in the legal minimum wage lead to significant increases in the wages and decreases in employment of private covered sector workers who have wages within 20% of the minimum wage before the change, but have no significant impact on wages in other parts of the distribution. The estimates from the employment transition equations suggest that the decrease in covered private sector employment is due to a combination of layoffs and reductions in hiring. Most workers who lose their jobs in the covered private sector as a result of higher legal minimum wages leave the labor force or go into unpaid family work; a smaller proportion find work in the public sector. We find no evidence that these workers become unemployed.

Suggested Citation

  • Alaniz, Enrique & Gindling, T.H. & Terrell, Katherine, 2011. "The impact of minimum wages on wages, work and poverty in Nicaragua," Labour Economics, Elsevier, vol. 18(S1), pages 45-59.
    • Handle: RePEc:eee:labeco:v:18:y:2011:i:s1:p:s45-s59
    DOI: 10.1016/j.labeco.2011.06.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927537111000716
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.labeco.2011.06.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Mariano Bosch & Marco Manacorda, 2010. "Minimum Wages and Earnings Inequality in Urban Mexico," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 128-149, October.
    3. John T. Addison & McKinleyl Blackburn, 1999. "Minimum Wages and Poverty," ILR Review, Cornell University, ILR School, vol. 52(3), pages 393-409, April.
    4. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, April.
    5. Carmen Pagés-Serra, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2000), pages 109-154, August.
    6. Gindling, T.H. & Terrell, Katherine, 2009. "Minimum wages, wages and employment in various sectors in Honduras," Labour Economics, Elsevier, vol. 16(3), pages 291-303, June.
    7. William Maloney & Jairo Mendez, 2004. "Measuring the Impact of Minimum Wages. Evidence from Latin America," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 109-130, National Bureau of Economic Research, Inc.
    8. Carmen Pagés-Serra & James J. Heckman, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," Research Department Publications 4227, Inter-American Development Bank, Research Department.
    9. Claudio Montenegro & Carmen Pagés, 2005. "Who Benefits from Labor Market Regulations? Chile 1960-1998," Central Banking, Analysis, and Economic Policies Book Series, in: Jorge Restrepo & Andrea Tokman R. & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Edi (ed.),Labor Markets and Institutions, edition 1, volume 8, chapter 4, pages 077-114, Central Bank of Chile.
    10. Gindling, T.H. & Terrell, Katherine, 2010. "Minimum Wages, Globalization, and Poverty in Honduras," World Development, Elsevier, vol. 38(6), pages 908-918, June.
    11. Lemos, Sara, 2009. "Minimum wage effects in a developing country," Labour Economics, Elsevier, vol. 16(2), pages 224-237, April.
    12. T. H. Gindling & Katherine Terrell, 2004. "Legal Minimum Wages and the Wages of Formal and Informal Sector Workers in Costa Rica," UMBC Economics Department Working Papers 04-102, UMBC Department of Economics.
    13. Carlos A.Arango & Angélica Pachón, 2004. "Minimum Wages in Colombia: Holding the Middle With a Bite on the Poor," Borradores de Economia 280, Banco de la Republica de Colombia.
    14. T. H. Gindling & Katherine Terrell, 2004. "The Effects of Multiple Minimum Wages Throughout the Labor Market," William Davidson Institute Working Papers Series 2004-701, William Davidson Institute at the University of Michigan.
    15. James J. Heckman & Carmen Pagés, 2004. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Books, National Bureau of Economic Research, Inc, number heck04-1.
    16. Tom Hertz, 2005. "The Effect of Minimum Wages on the Employment and Earnings of South Africa’s Domestic Service Workers," Working Papers 05099, University of Cape Town, Development Policy Research Unit.
    17. Gindling, T.H. & Terrell, Katherine, 2005. "The effect of minimum wages on actual wages in formal and informal sectors in Costa Rica," World Development, Elsevier, vol. 33(11), pages 1905-1921, November.
    18. Heckman, James J. & Pages, Carmen (ed.), 2004. "Law and Employment," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226322827, September.
    19. Gindling, T.H. & Terrell, Katherine, 2007. "The effects of multiple minimum wages throughout the labor market: The case of Costa Rica," Labour Economics, Elsevier, vol. 14(3), pages 485-511, June.
    20. Neumark, David & Cunningham, Wendy & Siga, Lucas, 2006. "The effects of the minimum wage in Brazil on the distribution of family incomes: 1996-2001," Journal of Development Economics, Elsevier, vol. 80(1), pages 136-159, June.
    21. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
    22. Andalón, Mabel & Pagés, Carmen, 2008. "Minimum Wages in Kenya," IZA Discussion Papers 3390, Institute of Labor Economics (IZA).
    23. Tom Hertz, 2005. "The Effect of Minimum Wages on the Employment and Earnings of South Africa's Domestic Service Workers," Upjohn Working Papers 05-120, W.E. Upjohn Institute for Employment Research.
    24. Lustig, N. & Mcleod, D., 1996. "Minimum Wages and Poverty in Developing Countries : Some Empirical Evidence," Papers 125, Brookings Institution - Working Papers.
    25. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-649, May.
    26. Carlos Arango & Angélica Pachón, 2004. "Minimum Wages in Colombia: Holding the Middle with a Bite," Borradores de Economia 3224, Banco de la Republica.
    27. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    28. Wendy Cunningham, 2007. "Minimum Wages and Social Policy : Lessons from Developing Countries," World Bank Publications - Books, The World Bank Group, number 6760.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gindling, T.H. & Terrell, Katherine, 2010. "Minimum Wages, Globalization, and Poverty in Honduras," World Development, Elsevier, vol. 38(6), pages 908-918, June.
    2. Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix, 2017. "Minimum Wages in Sub-Saharan Africa: A Primer," The World Bank Research Observer, World Bank, vol. 32(1), pages 21-74.
    3. Wong, Sara A., 2019. "Minimum wage impacts on wages and hours worked of low-income workers in Ecuador," World Development, Elsevier, vol. 116(C), pages 77-99.
    4. Groisman, Fernando & Boffi, Santiago & Calero, Analía & Cuba, María Soledad & Liniado, Julia & Sconfienza, María Eugenia & Vergara Parra, Albano, 2015. "Social protection to the informal sector: the role of minimum wage and income transfer policies," MPRA Paper 72822, University Library of Munich, Germany.
    5. Neumark, David & Munguía Corella, Luis Felipe, 2021. "Do minimum wages reduce employment in developing countries? A survey and exploration of conflicting evidence," World Development, Elsevier, vol. 137(C).
    6. Betcherman, Gordon, 2014. "Labor market regulations : what do we know about their impacts in developing countries ?," Policy Research Working Paper Series 6819, The World Bank.
    7. Richard B. Freeman, 2009. "Labor Regulations, Unions, and Social Protection in Developing Countries: Market distortions or Efficient Institutions?," NBER Working Papers 14789, National Bureau of Economic Research, Inc.
    8. Uma Rani, 2017. "Minimum Wage Policies and Their Effects in Developing Countries: A Comparative Perspective," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 60(1), pages 33-55, March.
    9. Long, Cheryl & Yang, Jin, 2016. "How do firms respond to minimum wage regulation in China? Evidence from Chinese private firms," China Economic Review, Elsevier, vol. 38(C), pages 267-284.
    10. Meghan J. Millea & Jon P. Rezek & Brian Shoup & Joshua Pitts, 2017. "Minimum Wages in a Segmented Labor Market: Evidence from South Africa," Journal of Labor Research, Springer, vol. 38(3), pages 335-359, September.
    11. Ham, Andrés, 2018. "The Consequences of Legal Minimum Wages in Honduras," World Development, Elsevier, vol. 102(C), pages 135-157.
    12. Arias, Omar & Blom, Andreas & Bosch, Mariano & Cunningham, Wendy & Fiszbein, Ariel & Lopez Acevedo, Gladys & Maloney, William & Saavedra, Jaime & Sanchez-Paramo, Carolina & Santamaria, Mauricio & Siga, 2005. "Pending issues in protection, productivity growth, and poverty reduction," Policy Research Working Paper Series 3799, The World Bank.
    13. Pandelis Mitsis, 2019. "The Impact of the Minimum Wage on Wages and Work in Cyprus," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 13(2), pages 72-101, December.
    14. Sara Wong, 2017. "Minimum wage impacts on wages and hours worked of low-income workers in Ecuador," Working Papers PMMA 2017-14, PEP-PMMA.
    15. ArnabK. Basu & NancyH. Chau & Ravi Kanbur, 2010. "Turning a Blind Eye: Costly Enforcement, Credible Commitment and Minimum Wage Laws," Economic Journal, Royal Economic Society, vol. 120(543), pages 244-269, March.
    16. Katzkowicz, Sharon & Pedetti, Gabriela & Querejeta, Martina & Bergolo, Marcelo, 2021. "Low-skilled workers and the effects of minimum wage in a developing country: Evidence based on a density-discontinuity approach," World Development, Elsevier, vol. 139(C).
    17. Haroon Bhorat & Tara Caetano & Benjamin Jourdan & Ravi Kanbur & Christopher Rooney & Benjamin Stanwix & Ingrid Woolard, 2016. "Investigating the Feasibility of a National Minimum Wage for South Africa," Working Papers 201601, University of Cape Town, Development Policy Research Unit.
    18. Nidhiya Menon & Yana van der Meulen Rodgers, 2017. "The Impact of the Minimum Wage on Male and Female Employment and Earnings in India," Asian Development Review, MIT Press, vol. 34(1), pages 28-64, March.
    19. Gindling, T.H. & Terrell, Katherine, 2009. "Minimum wages, wages and employment in various sectors in Honduras," Labour Economics, Elsevier, vol. 16(3), pages 291-303, June.
    20. Maike Hohberg & Jann Lay, 2015. "The impact of minimum wages on informal and formal labor market outcomes: evidence from Indonesia," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-25, December.

    More about this item

    Keywords

    Minimum wages; Employment; Poverty;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

    Statistics

    Access and download statistics

    Corrections

    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:eee:labeco:v:18:y:2011:i:s1:p:s45-s59. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/labeco .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.