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Age-differentiated minimum wages in developing countries

Larrain, Mauricio and Poblete Lavanchy, Joaquin J. (2007) Age-differentiated minimum wages in developing countries. Journal of Development Economics, 84 (2). pp. 777-797. ISSN 0304-3878

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Abstract

The fact that minimum wages seem especially binding for young workers has led some countries to adopt age-differentiated minimum wages. We develop a dynamic competitive two-sector labor market model where workerswith heterogeneous initial skills gain productivity through experience.We compare two equally binding schemes of single and age-differentiated minimumwages, and find that although differentiated minimumwages result in a more equal distribution of income, such a scheme creates a more unequal distribution of wealth by forcing less skilled workers to remain longer in the uncovered sector.We also show that relaxing minimumwage solely for young workers reduces youth unemployment but harms the less skilled ones.

Item Type: Article
Official URL: http://www.elsevier.com/wps/find/journaldescriptio...
Additional Information: © 2007 Elsevier
Library of Congress subject classification: H Social Sciences > HJ Public Finance
H Social Sciences > HN Social history and conditions. Social problems. Social reform
Sets: Research centres and groups > Managerial Economics and Strategy Group
Departments > Management
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 11 May 2011 11:57
URL: http://eprints.lse.ac.uk/36093/

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