We study the causal impact of the
minimum wage on labor market outcomes, household consumption,
inequality and poverty in Thailand by relying on policy variation in
minimum wages over time across provinces. We find that minimum-wage
increases have a large and significant impact on the likelihood of
working in the uncovered sector among workers with elementary
education. However, the impact is very small and insignificant among
other labor market groups. In contrast, the minimum wage has large
positive effects on the formal sector wages of low-earning workers,
such as the young, elderly and low educated. Increases in the
minimum wage are associated with reductions in household poverty and
consumption inequality at the bottom half of the distribution.
We analyze how labor flows respond
to idiosyncratic shifts in firm-level production functions and
demand curves using very detailed Swedish micro data. Shocks to
firms' physical productivity have only modest effects on firm-level
employment decisions. In contrast, we document rapid and substantial
employment adjustments through both hires and separations in
response to firm-level demand shocks. The choice of adjustment
margin depends on the sign of the shock: Firms adjust through
increased hires if these shocks are positive and through increased
separations if the shocks are negative.
The Gini coefficient of labor earnings
in Brazil fell by nearly a fifth between 1995 and 2012, from 0.50 to
0.41. The decline in earnings inequality was even larger by other
measures, with the 90-10 percentile ratio falling by almost 40
percent. Although the conventional explanation of a falling
education premium did play a role, an RIF regression-based
decomposition analysis suggests that the decline in returns to
potential experience was the main factor behind lower wage
disparities during the period. Substantial reductions in the gender,
race, informality and urban-rural wage gaps, conditional on human
capital and institutional variables, also contributed to the
decline. Although rising minimum wages were equalizing during
2003-2012, they had the opposite effects during 1995-2003, because
of declining compliance. Over the entire period, the direct effect
of minimum wages on inequality was muted.
A rapid expansion in the demand
for post-secondary education triggered an unprecedented boom of
higher education programs in Colombia, possibly deteriorating
quality. This paper uses rich administrative data matching school
admission information, socio-economic characteristics of the young
graduates, standardized test scores pre- and post-tertiary education
and entry wages, to assess the heterogeneity in the value added
generated by new higher education programs. Our findings show that
once we account for self-selection the penalty of attending a
recently created program, which initially appeared to be quite
large, becomes close to zero.
WORK IN PROGRESS
Minimum Wages and the Uncovered Sector in Low and Middle Income
Countries
Giulia Lotti, Julián Messina and Luca Nunziata
We present new empirical evidence on
the implications of minimum wages for the uncovered sector in
developing countries, analyzing a unique dataset assembled from a
set of micro surveys collected in 59 low and middle income
countries. Our identification strategy exploits relative bindingness
in minimum wages across labor market groups within countries and
years. The empirical findings show that a higher minimum wage is
associated with a larger self-employment share. The effect is
approximately linear in the relative level of the minimum wage, even
if higher levels of minimum wages are associated with higher levels
of non-compliance. The estimated impact of the minimum wage on
informality is economically significant: a 1 percentage point
increase in the minimum wage ratio is associated with a 0.204
percentage points increase in the self-employment rate.
The polarization hypothesis in Latin America: how demand forces
are shaping wage inequality?
Julián Messina, Giovanni Pica and Ana María Oviedo
The objective of the paper is
to document whether employment and wage polarization occurs in Latin
American countries. We measure the routine/abstract/manual content
of jobs in Latin American countries exploiting a novel survey
conducted in Bolivia, Colombia and El Salvador (STEP, Skills Towards
Employment and Productivity). Comparing task intensity scores in
those countries and the U.S. shows that while the abstract content
of jobs is similar in North- and South-America, the routine and
manual contents are different. We speculate that the reason may be
that Latin American occupations comprise a more heterogeneous set of
tasks. Merging occupation-specific information on the task intensity
with individual-level data available for Mexico and Chile, we show
that employment polarization seems to take place in Chile but not in
Mexico during the 2000s. No evidence of wage polarization shows up.
Descriptive evidence from cross-sectional individual data on the
returns to skills in Mexico and Chile suggests that abstract and
manual tasks have positive returns, the latter being more pronounced
for older workers, while returns to routine tasks are negative.
Partial Identification of Treatment Effects in Observational Data
under Sample Selection: an Application to PISA Test Scores in Brazil
Dimitris Christelis and Julián Messina
The identification of the causal
impact of parental education on children’s school performance is
affected by the endogeneity of parental education, as well as the
possibility of sample selection due to children dropping out of
school. We address both these issues using partial identification
methods that bound the causal effect of interest in observational
data under relatively mild assumptions. We apply our methods to
identify the causal impact of mothers’ education on children’s PISA
test scores in Argentina. We find that higher levels of maternal
education substantially increase children’s test scores in the
middle quantiles of the score distribution.
Downward Wage Rigidity, Unemployment and Informality. Evidence
from Brazil
Julián Messina and Anna Sanz de Galdeano