The Minimum Wage Puzzle in Less Developed Countries: Reconciling Theory and Evidence

Christopher Adam and Edward Buffie

No 2020/023, IMF Working Papers from International Monetary Fund

Abstract: We show that a dynamic general equilibrium model with efficiency wages and endogenous capital accumulation in both the formal and (non-agricultural) informal sectors can explain the full range of confounding stylized facts associated with minimum wage laws in less developed countries.

Keywords: WP; math display; employment elasticity; wage premium; aggregate output; capital stock; private sector; unemployment rate; Employment; Wages; Real wages; Informal employment; Africa; minimum wage; lighthouse effect; production function; firm size effect; employment loss; supply price (search for similar items in EconPapers)
Pages: 77
Date: 2020-01-31
New Economics Papers: this item is included in nep-dge
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