published in: Michigan Journal of International Law, 2004, 26(1), 245-269
This paper contributes to our understanding of the impact of institutions on incomes of
workers in developing countries by rigorously addressing the question as to whether changes
in minimum wages can change the inequality of the distribution of earnings. More specifically,
we analyze whether changes in Costa Rica’s complex institution of multiple minimum wages
in the 1980s and 1990s acted as a countervailing force to the unequalizing effect of
globalization. Using annual data on workers from the 1987-1997 household surveys, it is
shown that changes in the legal minimum wages did indeed have an effect on wage
inequality and that these changes would not have been captured using the simple
interpretation of minimum wages found in much of the literature.
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