Fighting “Low Equilibria” by Doubling the Minimum Wage? Hungary’s Experiment

Gabor Kertesi and Janos Köllő ()

No 970, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In January 2001 the Hungarian government increased the minimum wage from Ft 25,500 to Ft 40,000. One year later the wage floor rose further to Ft 50,000. The paper looks at the short-run impact of the first hike on small-firm employment and flows between employment and unemployment. It finds that the hike significantly increased labor costs and reduced employment in the small firm sector; and adversely affected the job retention and job finding probabilities of low-wage workers. While the conditions for a positive employment effect were mostly met in depressed regions spatial inequalities were amplified rather than reduced.

Keywords: minimum wages; transition; regional labor markets (search for similar items in EconPapers)
JEL-codes: J38 P23 R23 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2003-12
New Economics Papers: this item is included in nep-eec, nep-geo and nep-tra
References: View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Working Paper: Fighting “Low Equilibria” by Doubling the Minimum Wage ? Hungary’s Experiment (2004)
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