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Friday, November 18, 2011

Minimum Wages and Industrialization

Chris Blattman:

Do minimum wages drive industrialization?, by Chris Blattman: Minimum wages kill employment, right?

Maybe not..., evidence from Indonesia’s industrialization:

Big Push models suggest that local product demand can create multiple labor market equilibria: one featuring high wages, formalization, and high demand and one with low wages, informality, and low demand. I demonstrate that minimum wages may coordinate development at the high wage equilibrium.

formal employment increases and informal employment decreases in response to the minimum wage. Local product demand also increases, and this formalization occurs only in the non-tradable, industrializable industries

A new paper from Jeremy Magruder.

    Posted by on Friday, November 18, 2011 at 12:24 AM in Development, Economics | Permalink  Comments (61)


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