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The effect of minimum wage hikes on employment: Evidence from regional panel data from Romania

Smaranda Pantea

Economic Systems, 2020, vol. 44, issue 3

Abstract: Minimum wage hikes aim to increase the income of low-wage workers and improve their labour market participation. However, there are concerns that large increases may reduce employment, especially in countries where minimum wages increased quickly and whose competitiveness depends, at least partly, on low production costs. This study examines the employment effect of large increases in the minimum wage in Romania between 2008 and 2016. It uses regional (NUTS III) data and dynamic panel methods. The results do not support the hypothesis that minimum wage hikes reduce employment. They are robust to the use of different econometric methods, plausible variations of the specification and definitions of the key variables. Moreover, the results suggest insignificant effects even for low wage, less developed or high unemployment regions.

Keywords: Employment; Minimum wage; Regional labour markets; Transition economies (search for similar items in EconPapers)
JEL-codes: J23 J31 O25 R23 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.ecosys.2020.100805

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