The implications of a rise in the minimum wage on the Mexican labour market

• Main Author: Bouchot Viveros, Jorge Alfredo
• Published: University of Birmingham 2018
• Subjects: H Social Sciences (General)
• Online Access: https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.760370

This thesis details a comprehensive empirical evaluation of the implications of a minimum wage increase in the Mexican labour market, estimating the impact on real wages, the distribution of earnings, employment, and informal employment. It uses, as a natural experiment the 2012 partial harmonization of Mexico's regional minimum wages, in which one out of the three minimum wage zones experienced an unexpected minimum wage rise. Using Difference in Differences regressions, we fmd no evidence of adverse employment effects in the labour market. Instead, the estimates suggest positive effects on real hourly wages, employment, and occupation in the formal sector. These results can be taken as evidence for the existence of monopsonistic labour markets in Mexico. Synthetic Control Method procedures demonstrate that the employment findings are robust to the choice of estimation method and to the level of aggregation in the data, corroborating non-negative effects on employment. In addition, Unconditional Quantile Regressions for the distributional wage effects suggest a small improvement in wages for the targeted lowest income workers, although, due to positive spillover effects, the relative increase in wages for the upper percentiles is even greater. This has the net effect of actually widening dispersion of wages.