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The long run wage-employment elasticity: Evidence from Colombia

Jhon Mora and Juan Muro ()

No 1901, Alcamentos from Universidad de Alcalá, Departamento de Economía.

Abstract: Several years ago, many articles showed that the relationship between wage increases and unemployment rise is not clear in the USA. This USA evidence was important to determine the recommendation of Stiglitz that a 22% increase of the minimum wage in Spain will not reduce the employment in 2018. To our view, the USA evidence is insufficient to consider that this advice can be extended to all countries. Differences in regulations, institutions and welfare systems –mainly unemployment insurance-, among others, may produce around the world different results to the expected outcome in the USA that an increase of the real wages does not provoke an unemployment rise. Colombia as a developing country, with institutions that differ in design and practice from those of the USA, could be a good testing example. In this paper, we analyse the effect of a rise in wages on the demand for employment using Colombian data. Our meta-analysis shows that a 1% real wage increment causes an 0,11% employment fall in the long run. These results stand despite publication biases.

Keywords: Wage-employment elasticity; meta-analysis; publication bias (search for similar items in EconPapers)
JEL-codes: C83 J23 J31 (search for similar items in EconPapers)
Pages: pages 27
Date: 2019
New Economics Papers: this item is included in nep-lma
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