Low-Skilled Workers and the Effects of Minimum Wage in a Developing Country: Evidence Based on a Density-Discontinuity Approach

46 Pages Posted: 17 Nov 2020

See all articles by Sharon Katzkowicz

Sharon Katzkowicz

Centro Interdisciplinario de Estudio sobre el Desarrollo (CIEDUR)

Gabriela Pedetti

Centro Interdisciplinario de Estudio sobre el Desarrollo (CIEDUR)

Martina Querejeta

Centro Interdisciplinario de Estudio sobre el Desarrollo (CIEDUR)

Marcelo Bergolo

Universidad de la Republica - Instituto de Economía; IZA Institute of Labor Economics

Date Written: September 5, 2020

Abstract

We estimated the impact of the minimum wage on wages, unemployment, and formal-informal sector mobility for women in the domestic-work sector in Uruguay. Applying the density-discontinuity design developed by Jales (2017), we used cross-sectional data for the period 2006-2016 from the National Household Survey and found that the minimum wage had significant effects on labor outcomes, with almost 20% of women increasing their wages to reach the minimum. This effect was observed in both the formal and informal sectors, though the latter was not covered by the policy. We also showed a decline in employment in the domestic sector as well as a significant effect on formal-informal sector mobility with negative impacts on formal employment. We present suggestive evidence those effects were offset by other labor policies undertaken in the analysis period.

Keywords: Minimum wage, labour market, gender, informal sector, developing countries

JEL Classification: J08, J16, J21, J31

Suggested Citation

Katzkowicz, Sharon and Pedetti, Gabriela and Querejeta, Martina and Bergolo, Marcelo, Low-Skilled Workers and the Effects of Minimum Wage in a Developing Country: Evidence Based on a Density-Discontinuity Approach (September 5, 2020). Available at SSRN: https://ssrn.com/abstract=3702334 or http://dx.doi.org/10.2139/ssrn.3702334

Sharon Katzkowicz

Centro Interdisciplinario de Estudio sobre el Desarrollo (CIEDUR) ( email )

Uruguay

Gabriela Pedetti

Centro Interdisciplinario de Estudio sobre el Desarrollo (CIEDUR) ( email )

Uruguay

Martina Querejeta

Centro Interdisciplinario de Estudio sobre el Desarrollo (CIEDUR) ( email )

Uruguay

Marcelo Bergolo (Contact Author)

Universidad de la Republica - Instituto de Economía ( email )

Montevideo
Uruguay

HOME PAGE: http://www.marcelobergolo.com

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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