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The Impact of Minimum Wages on Wage Inequality and Employment in the Formal and Informal Sector in Costa Rica

El-Hamidi, Fatma and Terrell, Katherine (2001) The Impact of Minimum Wages on Wage Inequality and Employment in the Formal and Informal Sector in Costa Rica. (Unpublished)

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Abstract

This paper tests the impact of the Costa Rican minimum wage policy on wage inequality and the level of employment in the formal sector (covered by minimum wage legislation) and the informal (uncovered) sector. We also examine the redistributive effects of the minimum wage, between the covered sector and the uncovered sector. Regression analysis using micro data from the Labour Force Surveys over 17 years reveals three important findings. At the median, a unit increase in the minimum wage relative to the average wage is associated with: a) a reduction in wage inequality in the covered sector of between 0.9 percent (using the Gini) and 1.7 percent (using the Theil mean logarithmic deviation) and there is no effect on earnings inequality among the self-employed (using all measures); b) an increase in the level of covered sector employment by 0.56 percent, but no effect on the number of self-employed over time; c) an increase in the average number of hours worked per week by 0.14 percent in the covered sector and 0.34 percent in the uncovered sector.


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Details

Item Type: Article
Status: Unpublished
Creators/Authors:
CreatorsEmailPitt UsernameORCID
El-Hamidi, Fatmafatma@pitt.eduFATMA
Terrell, Katherine
Date: 2001
Date Type: Publication
Institution: University of Pittsburgh
Schools and Programs: Dietrich School of Arts and Sciences > Economics
Graduate School of Public and International Affairs > Public and International Affairs
Refereed: Yes
Date Deposited: 06 Oct 2010 15:25
Last Modified: 25 Aug 2017 05:09
URI: http://d-scholarship.pitt.edu/id/eprint/5752

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