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The minimum wage in Colombia 1984-2001: favoring the middle class with a bite on the poor

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  • CARLOS A. ARANGO
  • ANGÉLICA PACHÓN

Abstract

This paper exploits the long history of the minimum wage in Colombia in order to see whether it has improved the living conditions of low income families and reduced income inequality. This paper also explores how the minimum wage may have distorted market outcomes in the process. We fi nd signifi cant negative minimum wage effects on both the likelihood of being employed and hours worked among household heads. The negative effect is strongest for women, the young and less educated people. For non-head household members, we fi nd that a rise in the minimum wage signifi cantly increases labor participation, reduces hours worked, and increases the likelihood of being unemployed. Most importantly, we fi nd evidence that the minimum wage ends up being regressive, improving the living conditions of families in the middle and the upper parts of the income distribution but causing net losses for those at the bottom

Suggested Citation

  • Carlos A. Arango & Angélica Pachón, 2007. "The minimum wage in Colombia 1984-2001: favoring the middle class with a bite on the poor," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 25(55), pages 148-193, December.
    • Handle: RePEc:bdr:ensayo:v:25:y:2007:i:55:p:148-193
    DOI: 10.32468/Espe.5505
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    Cited by:

    1. Francisco Lasso-Valderrama & Carmiña O. Vargas, 2024. "Distribution, Inequality and Poverty in Colombia: An Assessment of the Contribution of the Minimum Wage," Borradores de Economia 1279, Banco de la Republica de Colombia.
    2. Echavarría-Soto, Juan José & López, Enrique & Ocampo, Sergio & Rodríguez-Niño, Norberto, 2012. "Choques, instituciones laborales y desempleo en Colombia," Chapters, in: Arango-Thomas, Luis Eduardo & Hamann-Salcedo, Franz Alonso (ed.), El mercado de trabajo en Colombia : hechos, tendencias e instituciones, chapter 18, pages 753-794, Banco de la Republica de Colombia.
    3. Ham, Andrés, 2018. "The Consequences of Legal Minimum Wages in Honduras," World Development, Elsevier, vol. 102(C), pages 135-157.
    4. Baensch Laura & Lanzalot Maria Laura & Lotti Giulia & Stucchi Rodolfo, 2019. "Do Labor Market Regulations Affect the Link between Innovation and Employment? Evidence from Latin America," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(3), pages 1-13, July.
    5. Marlies Piek & Dieter von Fintel, 2020. "Sectoral minimum wages in South Africa: Disemployment by firm size and trade exposure," Development Southern Africa, Taylor & Francis Journals, vol. 37(3), pages 462-482, May.
    6. Luis E. Arango & Luz A. Flórez, 2017. "Informalidad laboral y elementos para un salario mínimo diferencial por regiones en Colombia," Borradores de Economia 1023, Banco de la Republica de Colombia.

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    More about this item

    Keywords

    minimum wage; income distribution; income inequality; poverty alleviation;
    All these keywords.

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy

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