Minimum Wages and the Distribution of Firm Wage Premia

Marcelo Bergolo, Rodrigo Ceni, Mathias Fondo and Damián Vergara

No 34188, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper leverages a large minimum wage reform in Uruguay to study the effects of minimum wages on the distribution of firm wage premia. The reform significantly decreased wage inequality, mainly by reducing between-firm inequality. AKM and time-varying AKM analyses reveal a large compression in the distribution of firm fixed effects after the reform, driven by an increase in the fixed effects of low-premium firms. Firm-level and worker-level difference-in-differences analyses document a causal effect of the reform on the compression of firm fixed effects. Results suggest minimum wages can increase the supply of “good jobs” by “making bad jobs better”.

JEL-codes: J01 J08 J30 J38 (search for similar items in EconPapers)
Date: 2025-08
New Economics Papers: this item is included in nep-bec, nep-inv, nep-lam and nep-lma
Note: LS PE
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