Minimum wages, wages and employment in various sectors in Honduras

Thomas (Tim) Gindling and Katherine Terrell

Labour Economics, 2009, vol. 16, issue 3, 291-303

Abstract: This paper contributes to our understanding of the impact of minimum wages on labor markets of developing countries, where there are often multiple minimum wages and compliance is weak. We examine how changes in more than 22 minimum wages over 1990-2004 affect employment, unemployment and average wages of workers in different sectors, defined by coverage under the legislation. The evidence suggests that minimum wages are effectively enforced only in medium and large-scale firms, where a 1% increase in the minimum wage leads to an increase of 0.29% in the average wage and a relatively large reduction in employment of -Â 0.46%. We find that public sector wages emulate minimum wage trends but the higher cost of labor does not reduce employment there. There are no discernable effects of minimum wages on the wages of workers in small-firms or the self-employed; yet, higher minimum wages may create more unemployment. We conclude that (even under our upper bound estimate of the effect on the wages of workers) the total earnings of workers in the large-firm covered sector fall with higher minimum wages in Honduras, which warrants a policy dialogue on the structure and level of minimum wages.

Keywords: Employment; Unemployment; Minimum; wage; Wage; Central; America; Honduras; Covered; sector; Informal; sector (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927-5371(08)00114-0
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:16:y:2009:i:3:p:291-303

Access Statistics for this article

Labour Economics is currently edited by A. Ichino

More articles in Labour Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().