Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/36129 
Authors: 
Year of Publication: 
2009
Series/Report no.: 
IZA Discussion Papers No. 4335
Publisher: 
Institute for the Study of Labor (IZA), Bonn
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: 
Document Type: 
Working Paper

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