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The Minimum Wage in Colombia 1984-2001: Favoring the Middle Class with a Bite on the Poor

Carlos Alberto Arango () and Angélica Pachón ()

Revista ESPE - Ensayos Sobre Política Económica, 2007, vol. 25, issue 55, 148-193

Abstract: This paper exploits the long history of the minimum wage in Colombia in order to see whether it has im-proved the living conditions of low income families and reduced income inequality. This paper also ex-plores how the minimum wage may have distorted market outcomes in the process. We fi nd signifi cant negative minimum wage effects on both the likeli-hood of being employed and hours worked among household heads. The negative effect is strongest for women, the young and less educated people. For non-head household members, we fi nd that a rise in the minimum wage signifi cantly increases labor participation, reduces hours worked, and increases the likelihood of being unemployed. Most impor-tantly, we fi nd evidence that the minimum wage ends up being regressive, improving the living con-ditions of families in the middle and the upper parts of the income distribution but causing net losses for those at the bottom.

Keywords: minimum wage; income distribution; income inequality; poverty alleviation. (search for similar items in EconPapers)
JEL-codes: J31 J42 J48 O15 (search for similar items in EconPapers)
Date: 2007
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