Employment, inequality and minimum wages in Argentina

FERNANDO GROISMAN

Regulating for Decent Work. Second Volume.

Palgrave-Macmillan

Año: 2013; p. 87 - 125

Abstract The main objective of this paper is to assess the impact of minimum wage (MW) on labour income inequality and employment in Argentina. Given the high incidence of informality, the effects of changes in MW will be estimated for both the formal and the informal sector. The case of Argentina provides the opportunity to explore how periodical increases in the level of MW affect the income distribution and the level of employment before, during and after the crisis. From Dec. 2003 to Dec. 2010 the MW augmented nineteen times. Firstly, we estimate diverse probability models (logit and multinomial logit) in order to evaluate the chances of an individual remaining in the same labor market status after the MW changed (see Marshall, 2006). Effects on income distribution will be analyzed through Kernel density functions. Through this non-parametric technique it is possible to test if wage distributions (formal and informal) show spikes around the MW level (Lemos, 2009). Secondly, we use diverse difference-in-difference models (see Dolton et al, 2010)[1]. A difference-in-difference estimator (before and after the relevant change occurred) is usually calculated for two groups: treatment and control. To identify the groups we exploit the geographical variation of the MW bite. As the MW in Argentina is national, the MW changes affect varying proportions of.workers below the new MW in each state. The treatment and control group will be defined.according to the different bites of the new MW (high impact and low impact). We use data coming from the Permanent Household Survey (EPH) carried out by the National Statistical Office (INDEC). [1] Inspired by Card, D. (1992) ?Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage?, Industrial and Labor Relations Review Vol. 46, No. 1 and Stewart, M. (2002) ?Estimating the Impact of the Minimum Wage Using Geographical Wage Variation?, Oxford Bulletin of Economics and Statistics, Vol. 64.