Do Minimum Wages Reduce Employment in Developing Countries? A Survey and Exploration of Conflicting Evidence

63 Pages Posted: 18 Nov 2019 Last revised: 13 May 2024

See all articles by David Neumark

David Neumark

University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Luis Felipe Munguia Corella

Comisión Nacional de los Salarios Mínimos

Date Written: November 2019

Abstract

Evidence from studies of the employment effects of minimum wages in developing countries is mixed. One interpretation is that there is simply no clear evidence of disemployment effects in developing countries. Instead, however, we find evidence that the heterogeneity is systematic, with estimated effects more consistently negative in studies with relatively more features for which institutional factors and the competitive model more strongly predict negative effects. These features include whether studies: (i) focus on vulnerable workers; (ii) use data for the formal sector; (iii) cover countries where minimum wage laws are strongly enforced; and (iv) estimate effects for countries and periods with binding minimum wages.

Suggested Citation

Neumark, David and Munguia Corella, Luis Felipe, Do Minimum Wages Reduce Employment in Developing Countries? A Survey and Exploration of Conflicting Evidence (November 2019). NBER Working Paper No. w26462, Available at SSRN: https://ssrn.com/abstract=3488962

David Neumark (Contact Author)

University of California, Irvine - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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Luis Felipe Munguia Corella

Comisión Nacional de los Salarios Mínimos ( email )

Ave. Cuauhtémoc 14
Col. Doctores
Ciudad de México, Ciudad de México 06720
Mexico

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