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Heterogeneous Effects of Imperfectly Enforced Minimum Wages in Low-Wage Labor Markets

Vidhya Soundararajan
Journal Name
Journal of Development Economics
Journal Publication
others
Publication Year
2019
Journal Publications Functional Area
Economics
Publication Date
Vol. 140, September 2019, Pg. 355-374
Abstract

We present minimum wage effects across different enforcement regimes. Exploiting state-time variation and policy discontinuities at contiguous districts across state borders in India, we show that the effect of minimum wages on wages and employment significantly increases with an increase in enforcement. In weak enforcement regimes, estimated wage effects are negligible and employment effects are negative or null. In stricter regimes, wage effects are positive and strong, and employment effects are positive or null in most specifications. These results are consistent with theories on imperfect enforcement in monopsonistic labor markets, and are robust to alternative definitions of enforcement and employment, and employing instrumental variables for enforcement

Heterogeneous Effects of Imperfectly Enforced Minimum Wages in Low-Wage Labor Markets

Author(s) Name: Vidhya Soundararajan
Journal Name: Journal of Development Economics
Volume: Vol. 140, September 2019, Pg. 355-374
Year of Publication: 2019
Abstract:

We present minimum wage effects across different enforcement regimes. Exploiting state-time variation and policy discontinuities at contiguous districts across state borders in India, we show that the effect of minimum wages on wages and employment significantly increases with an increase in enforcement. In weak enforcement regimes, estimated wage effects are negligible and employment effects are negative or null. In stricter regimes, wage effects are positive and strong, and employment effects are positive or null in most specifications. These results are consistent with theories on imperfect enforcement in monopsonistic labor markets, and are robust to alternative definitions of enforcement and employment, and employing instrumental variables for enforcement