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Title:Setting the minimum wage PDF Logo
Authors:Boeri, Tito
Issue Date:2009
Series/Report no.:IZA Discussion Papers 4335
Abstract:The process leading to the setting of the minimum wage so far has been fairly overlooked by economists. This paper suggests that this is a serious limitation as the setting regime contributes to explain cross-country variation in the fine-tuning of the minimum wage, hence in the way in which the trade-off between reducing poverty among working people and shutting down low productivity jobs is addressed. There are two common ways of setting national minimum wages: they are either government legislated or are the outcome of collective bargaining agreements, which are extended erga omnes to all workers. We develop a simple model relating the level of the minimum wage to the setting regime. Next, we exploit a new data set on minimum wages in 66 countries that had already or introduced a minimum wage in the period 1981-2005 to test the implications of the model. We find that a Government legislated minimum wage is lower than a wage floor set within collective agreements. This effect survives to several robustness checks and hints at a causal relation between the setting regime and the level of the minimum wage.
Subjects:Minimum wages
collective bargaining
statutory minimum
JEL:J31
J41
J42
Persistent Identifier of the first edition:urn:nbn:de:101:1-20090909330
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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