Work

Closing the gap

Year: 1986

Type: article

Abstract: This paper examines the dynamic effect of minimum wage policy on employment and unemployment using multivariate time series techniques. The particular minimum wage policy being considered occurred in Puerto Rico in 1974 when it was decided to close the minimum wage gap between the island and the United States incrementally by 1980. Multivariate transfer functions are specified with the intent of distinguishing between minimum wage policy effects and structural changes brought about by the post-1974 recessions. The results suggest that minimum wage policy gave rise to more significant unemployment than disemployment effects. The pattern of labor mobility supports that suggested by the development literature in which labor flows from uncovered to covered sectors. However, given the structure of welfare programs on the island, it is likely that flows from the covered to the non-market sector also took place.

Source: Journal of Development Economics

DOI: 10.1016/0304-3878(86)90120-3

Author: Carlos E. Santiago

Institutions: Wayne State University, Yale University

Language: English

Topic: Labor market dynamics and wage inequality

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, Reduced inequalities, No poverty

Open Access status: hybrid

Estimated APC paid: $4,590