Abstract: We estimate the employment effects of changes in national minimum wages using a pooled
cross-section time-series data set comprising 17 OECD countries for the period 1975-2000,
focusing on the impact of cross-country differences in minimum wage systems and in other
labor market institutions and policies that may either offset or amplify the effects of
minimum wages. The average minimum wage effects we estimate using this sample are consistent
with the view that minimum wages cause employment losses among youths. However, the evidence
also suggests that the employment effects of minimum wages vary considerably across countries.
In particular, disemployment effects of minimum wages appear to be smaller in countries that
have subminimum wage provisions for youths. Regarding other labor market policies and institutions,
we find that more restrictive labor standards and higher union coverage strengthen the disemployment
effects of minimum wages, while employment protection laws and active labor market policies designed
to bring unemployed individuals into the work force help to offset these effects. Overall, the
disemployment effects of minimum wages are strongest in the countries with the least regulated
labor markets.
Keywords: Minimum wages, youth employment, labor market institutions
Full paper (1122 KB PDF)
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