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Effects of Minimum Wages on Total Employment: Evidence from Cyprus

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  • Pandelis Mitsis

Abstract

This study examines the relationship between total employment and the minimum wage in the special case where only a number of occupations are covered by the relevant legislation. Empirical evidence is provided by analysing time series data from Cyprus, the only country in the European Union where the minimum wage coverage is limited to a small number of occupations. After addressing the issues of stationarity, dynamic specification and endogeneity that most of the existing literature ignores, evidence is found of a significant and negative relationship between the minimum wage and total employment. This result is robust across variations in the sample period and the measure of the minimum wage. In the framework of recently developed search and matching models, the findings suggest the existence of significant spill-over effects to the occupations that are not covered by the minimum wage legislation. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Pandelis Mitsis, 2015. "Effects of Minimum Wages on Total Employment: Evidence from Cyprus," Journal of Labor Research, Springer, vol. 36(3), pages 318-345, September.
    • Handle: RePEc:spr:jlabre:v:36:y:2015:i:3:p:318-345
    DOI: 10.1007/s12122-015-9205-0
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    More about this item

    Keywords

    Minimum wage; Coverage; Employment effects; Time series models; J38; J48; E24; C32;
    All these keywords.

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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