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Does the Minimum Wage Affect Wage Inequality? A Study for the Six Largest Latin American Economies

Author

Listed:
  • Carlo Lombardo

    (CEDLAS-IIE-FCE-UNLP & CONICET)

  • Lucía Ramirez-Veira

    (CEDLAS-IIE-FCE-UNLP & CONICET)

  • Leonardo Gasparini

    (CEDLAS-IIE-FCE-UNLP & CONICET)

Abstract

Minimum wage (MW) policies are widespread in the developing world and yet their effects are still unclear. In this paper we explore the effect of national MW policies in Latin America’s six largest economies by exploiting the heterogeneity in the bite of the national minimum wage across local labor markets and over time. We find evidence that the MW has a compression effect on the wage distribution of formal workers. The effect was particularly large during the 2000s, a decade of sustained growth and strong labor markets. In contrast, the effect seems to vanish in the 2010s, a decade of much weaker labor markets. We also find suggestive evidence of a lighthouse effect: the MW seems to have an equalizing effect also on the wage distribution of informal workers.

Suggested Citation

  • Carlo Lombardo & Lucía Ramirez-Veira & Leonardo Gasparini, 2022. "Does the Minimum Wage Affect Wage Inequality? A Study for the Six Largest Latin American Economies," CEDLAS, Working Papers 0302, CEDLAS, Universidad Nacional de La Plata.
    • Handle: RePEc:dls:wpaper:0302
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    References listed on IDEAS

    as
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      by maximorossi in NEP-LTV blog on 2022-09-20 20:20:13

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    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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