Do minimum wages reduce employment in developing countries? A survey and exploration of conflicting evidence

• Published in: World development Vol. 137; p. 105165
• Main Authors: Neumark, David, Munguía Corella, Luis Felipe
• Format: Journal Article
• Language: English
• Published: Oxford Elsevier Ltd 01.01.2021; Elsevier Science Publishers; Pergamon Press Inc
• Subjects: Competitive model; Developing countries; Effects; Employment; Heterogeneity; Institutional factors; Labor law; LDCs; Meta-analysis; Minimum wage; Organizational aspects; Surveys; Vulnerability; Wages; Wages & salaries; Minimum wage; Institutional factors; Employment; Competitive model; Meta-analysis
• ISSN: 0305-750X; 1873-5991
• DOI: 10.1016/j.worlddev.2020.105165

•Studies of employment effects of minimum wages in developing countries provide mixed evidence.•Evidence of job loss is clearer for less-skilled and formal-sector workers, and binding and strongly enforced minimum wages.•Minimum wages are more likely to cost jobs in settings where they have a greater impact on wages. 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.