Wage and Employment Impact of Minimum Wage: Evidence from Lithuania

Jose Garcia-Louzao and Linas Tarasonis

No 103, Bank of Lithuania Working Paper Series from Bank of Lithuania

Abstract: This paper evaluates the worker-level effects of a historically large and permanent increase in the minimum wage in Lithuania. Our identification strategy leverages variation in workers’ exposure to the new minimum wage, and exploits the fact that there has been no increase in the minimum wage in previous years, to account for heterogeneous labor market prospects of low-wage workers relative to high-wage workers. Using detailed administrative records to track workers before and after the policy change, we show that the minimum wage hike significantly increased the earnings of low-wage workers. This direct effect was amplified by wage spillovers reaching the median of the income distribution. Overall, we find no negative effects on the employment prospects of low-wage workers. However, we provide suggestive evidence that young workers, highly exposed municipalities, and tradable sectors may be more negatively affected. Taken together, our findings imply an employment elasticity with respect to the minimum wage of -0.021, and an own-wage elasticity of -0.033, suggesting that wage gains dominated employment losses.

Keywords: Minimum Wage; Employment; Wages (search for similar items in EconPapers)
JEL-codes: J23 J38 J48 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2022-03-01
New Economics Papers: this item is included in nep-eur and nep-lma
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Related works:
Journal Article: Wage and Employment Impact of Minimum Wage: Evidence from Lithuania (2023)
Working Paper: Wage and Employment Impact of Minimum Wage: Evidence from Lithuania (2022)
Working Paper: Wage and employment impact of minimum wage: evidence from Lithuania (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:lie:wpaper:103

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