The effect of minimum wage hikes on employment: Evidence from regional panel data from Romania |
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| Affiliation: | 1. Department of Economics, Princeton University, USA;2. Directorate of Policy, Analysis, and Research in Public Economics, Ministry of Public Finance of Romania, Departments of Entrepreneurship and of International Economic Relations, Prague University of Economics and Business, Czech Republic;1. University of Potsdam, IZA, DIW, IAB, Chair of Empirical Economics, August-Bebel-Str. 89, Potsdam 14482, Germany;2. SOEP at DIW, Berlin;3. Freie Universität, Berlin;4. SOEP at DIW, Freie Universität, Berlin;5. University of Potsdam, Germany |
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| Abstract: | Minimum wage hikes aim to increase the income of low-wage workers and improve their labour market participation. However, there are concerns that large increases may reduce employment, especially in countries where minimum wages increased quickly and whose competitiveness depends, at least partly, on low production costs. This study examines the employment effect of large increases in the minimum wage in Romania between 2008 and 2016. It uses regional (NUTS III) data and dynamic panel methods. The results do not support the hypothesis that minimum wage hikes reduce employment. They are robust to the use of different econometric methods, plausible variations of the specification and definitions of the key variables. Moreover, the results suggest insignificant effects even for low wage, less developed or high unemployment regions. |
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| Keywords: | Employment Minimum wage Regional labour markets Transition economies |
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