Measuring the Impact of Minimum Wages: Evidence from Latin America

This paper first provides an overview of the levels of minimum wages in Latin America and their true impact on the distribution of wages using both numerical measures and kernel density plots. It identifies "numeraire" effects higher in the wage distribution and "lighthouse" or reference effects in the unregulated or "informal" sector. The final section then employs panel employment data from Colombia, a country where minimum wages seem high and very binding, to quantify the effects of an increase on wages and employment. The evidence suggests that in the Latin American context, the minimum wage has impacts beyond those usually contemplated in the advanced country literature.