the consequences of legal minimum wages in honduras summary minimum wage policies are implemented in most developing countries so understanding their consequences is critical to determine their effectiveness this paper quantifies the labor market and poverty effects of honduran minimum wages from 2005 to 2012 using 13 household surveys as repeated cross sections i estimate the net effects of minimum wage hikes using variation from annual reforms to multiple minimum wages a 60 increase and changes in the number of minimum wage categories evidence shows that employers are partially complying with minimum wage laws and respond to hikes by increasing their level of non compliance higher minimum wages reduce covered formal employment and increase uncovered informal employment formal sector wages increase but greater labor supply in the informal sector leads to a negative net effect on wages this last result is often empirically ambiguous although consistent with the dual sector minimum wage model i find no evidence that minimum wages reduce extreme or moderate poverty

strategic amnesty and credible immigration reform why do countries that impose employer sanctions to deter the illegal entry of foreign workers nevertheless grant amnesty to illegal immigrants in this article i provide a positive theory of amnesty provision in a model where the constrained optimal immigration reform involving the joint use of employer sanctions and border interdictions is time inconsistent in particular my framework demonstrates that host countries of immigration can enhance the credibility of their immigration reforms by binding their own hands and strategically granting a socially excessive amount of amnesty to illegal workers

on the frequency of large stock returns putting booms and busts into perspective textabstractnumerous articles have investigated the distribution of share prices and find that the returns are fat tailed nevertheless there is still controversy about the amount of probability mass in the tails and hence about the most appropriate distribution to use in modeling returns this controversy has proven hard to resolve as the alternatives are non nested we employ extreme value theory focusing exclusively on the larger observations in order to assess the tail shape within a unified framework we find that at least the first two moments exist this enables one to generate robust probabilities on large returns which put the recent stock market swings into historical perspective

minimum wages for domestic workers impact evaluation of the indian experience abstract what impact does minimum wage legislation have on wages and employment opportunities in an informal sector in a developing country the paper answers this question in the context of minimum wage legislation for domestic workers in india over the period of 2004 2012 combining matching procedure with difference in difference estimation approach supported by extensive robustness checks the paper estimates both the short run and the long run impact of the legislation on real wages and employment results show a positive impact of the legislation on real wages in the shortrun while there is limited evidence of this effect persisting in the long run further the legislation did not seem to have any impact at the extensive margin on the probability of being employed as a domestic worker over short or long run our analysis further reveals that the wages of majority of workers remain below the minimum wage available evidence from the ground in line with theoretical predictions point towards weak enforcement of the legislation as the potential driving factor of observed results as india recently extended national level minimum wage for all workers the paper provides a cautionary tale on the potential pitfalls of implementation of this legislation in informal sector and suggests some ways to overcome the same

the expected penalty for committing a crime several papers have noted and sought to explain the paradox of minimum wage law compliance compliance rates are high even though the penalty for violating the law is allegedly less than the underpayment to workers by comparison we show that the actual penalty exceeds the underpayment we combine our estimates of the costs of violating the law with estimates of the probability of apprehension to arrive at the expected cost of violating the law in contrast with previous work we find that the expected costs are sufficiently high to make compliance rational

minimum wage effects under endogenous compliance evidence from peru latin american labor markets feature large informal sectors in practice however the simple duality formal informal has many different shades firms tend to comply more with certain legislation than with other recent evidence has suggested that minimum wages have significant effects on the informal sector bell 1997 for mexico gindling and terrell 2004 for costa rica lemos 2004 and fajnzylver 2001 for brazil and maloney and nunez 2004 for colombia further some of this evidence suggests effects throughout a large part of the wage distribution this has been interpreted as evidence of lighthouse or numeraire effects we test this hypothesis using panel data from peru to identify effects throughout the wage distribution although there are some effects on informal sector workers overall results provide little support for numeraire or lighthouse effects labor monthly earnings are affected only at the bottom of the distribution 0 25 0 60 of the minimum wage made up mostly of informal workers and for formal workers earning between the old the new minima negative effects on the probability of retaining employed status after a minimum wage shock are either weak or non significant for wage earners below the minimum wage but significant for formal workers trapped between minima and for both formal and informal earning between 1 2 and 2 times the minimum wage independent workers earning below minimum suffer negative effects on both earnings and employment

the minimum wage in formal and informal sectors evidence from an inflation shock abstract i estimate the effect of the minimum wage on formal wages informal wages and employment in colombia i exploit an unexpected increase in the real minimum wage during 1999 my analysis combines unconditional quantile regressions with a differences in differences design i find evidence of wage responses for wages close to the minimum wage the increases are present in both the informal and formal sectors and are larger in the formal one wages around the minimum increase by around 3 percent in the formal sector for a 10 percentage points larger minimum wage incidence and by around 1 percent in the informal sector these increases are smaller than those implied by full compliance to minimum wage policy but positive for some unaffected workers this suggests employers partially comply with the minimum wage and use it as a reference i find slight negative employment effects on the informal sector but not on the formal sector the effects in the informal sector are not driven by cross sectoral effects the results suggest the minimum wage has a direct impact on the informal labor market although they may not apply to minimum wage changes in other countries or contexts or to larger minimum wage increases

the asymptotic distribution of extreme stock market returns this article presents a study of extreme stock market price movements according to extreme value theory the form of the distribution of extreme returns is precisely known and independent of the process generating returns using data for an index of the most traded stocks on the new york stock exchange for the period 1885 1990 the author shows empirically that the extreme returns obey a frechet distribution copyright 1996 by university of chicago press

the minimum wage as a redistributive tool most analyses of the minimum wage focus on its unintended employment consequences the goal of a minimum wage is not of course to reduce employment but to redistribute earnings to low paid workers under what conditions can a minimum accomplish this are those conditions met in economies which otherwise rely extensively on markets to set wages such as the united states which in i994 rejected mandating health benefits that would have effectively raised the minimum or the united kingdom where in i995 the labour party promised a national minimum upon election who pays for the redistribution who benefits the redistributive effects of a minimum wage depend on the labour market and redistributive system in which it operates on the level of the minimum and on its enforcement at best an effective minimum wage will shift the earnings distribution in favour of the low paid and buttress the bottom tiers of the distribution from erosion at worst minimum wages reduce the share of earnings going to the low paid by displacing many from employment neither outcome is certain so that enacting a minimum is a risky but potentially profitable investment in redistribution it is the balancing of risk against gain that makes a minimum so controversial until the i980s i99os competitive labour markets in the united states and united kingdom produced rising real earnings for the low paid and falling earnings inequality so the risk of enacting a national minimum united kingdom or of raising substantially the national minimum united states seemed unnecessary why interfere with the competitive market when it produces socially desirable trends in earnings albeit a bit slower than one might accomplish with a legislated minimum two decades of falling real wages for lower decile workers in the united states and of rising earnings inequality in the united kingdom1 have however put the minimum back in play the job market is not doing much for lower paid workers in the united kingdom virtually all social groups accept the need for some redistribution though they differ on the best way to accomplish such in the united states pressures for tax cuts can be interpreted as a way for employees to gain real wage increases unavailable through the market the consensus favouring redistribution through the earned income tax credit disappeared in the midi 990s rush to reduce federal budget deficits this paper takes as its operating premise the goal of redistributing earnings

credible research designs for minimum wage studies a response to neumark salas and wascher the authors assess the critique by neumark salas and wascher 2014 of minimum wage studies that found small effects on teen employment data from 1979 to 2014 contradict nsw the authors show th

law and employment lessons from latin america and the caribbean analyzing the effects of regulation and deregulation on latin american labor markets law and employment joins the ongoing debate about the virtues and costs of legislating mandatory benefits for workers of the numerous labor regulations that were altered or created in latin america during the last thirty years many have had unintended and far reaching results nobel prize winning economist james j heckman and carmen pages document the behavior of firms attempting to stay in business and be competitive while facing the high costs of complying with these labor laws they challenge the prevailing view that labor market regulations affect only the distribution of labor incomes and have little or no impact on efficiency or the performance of labor markets this volume shows that mandated benefits reduce employment have a disruptive impact on turnover rates and labor market flexibility promote inequality and discriminate against marginal workers along with in depth studies of colombia peru brazil argentina chile and uruguay law and employment provides comparative analysis from a range of european countries and the united states while also covering important changes in reg

a damped diffusion framework for financial modeling and closed form maximum likelihood estimation abstract asset price bubbles can arise unintentionally when one uses continuous time diffusion processes to model financial quantities we propose a flexible damped diffusion framework that is able to break many types of bubbles and preserve the martingale pricing approach damping can be done on either the diffusion or drift function oftentimes certain solutions to the valuation pde can be ruled out by requiring the solution to be a limit of martingale prices for damped diffusion models monte carlo study shows that with finite time series length maximum likelihood estimation often fails to detect the damped diffusion function while fabricates nonlinear drift function an alternative method based on ait sahalia s specification test on parametric models is proposed

minimum wages and compliance the case of trinidad and tobago explores compliance to the national minimum wage in trinidad and tobago potential costs associated with the national minimum wage actual incidence of compliance in terms of employment and wage distribution nature of labor market this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from an this abstract was borrowed from another version of this item

on compliance with the minimum wage law economic analyses of the effects of minimum wage laws usually assume implicitly that employers fully comply with such laws however in a recent article in this journal ashenfelter and smith 1979 hereafter as have shown that this is not the case using data collected from employees as estimate that for the united states in 1973 only 64 percent of the workers who would otherwise have earned less than the federal minimum wage actually received the minimum wage similar data collected from employers indicated a compliance rate of 77 percent the magnitude of these numbers clearly indicates the need for a better understanding of the factors influencing noncompliance with the federal minimum wage law ashenfelter and smith present a model which explains employers compliance behavior they conclude that the incentive to comply is lower a the lower is the market wage below the minimum wage and b the larger is the elasticity of demand for labor in absolute value p 336 they also argue that the requirement that a violating employer merely pay to employees a fraction of the difference between the minimum and the actual wage received does not constitute a penalty for noncompliance at all p 337 however by assuming that the amount of the penalty that employers pay if they do not comply is exogenously given as do not consider the employment effects of the minimum wage that is that noncomplying employers will have hired in general more workers than they would have if they had complied consequently the requirement that a noncomplying employer pay a fraction of the difference between the two wages to his employees constitutes a real penalty this note presents an alternative formulation of the model proposed by as which accounts for the fact that the penalty that the

a theory of employment guarantees contestability credibility and distributional concerns abstract both raw intuition and past experience suggest that the success of an employment guarantee scheme egs in safeguarding the welfare of the poor depends both on the wage it promises and the ease with which any worker can gain access an egs is thus at once a wage guarantee and a rationing device we chart the positive and normative limits of such an egs as an efficiency improving and poverty alleviating policy reform in a canonical labor market setting at its core an egs provides an aggregate not just egs employment target given the target the egs wage and access can be fine tuned to deliver outcomes ranging from a contestable labor market to a simple universal unemployment benefit the credibility of any such target however is shown to be triggered endogenously by a host of factors the distributional concerns of the planner private sector productivity the prevalence of market power and the need for public works paradoxically the outcome with a planner who cares only about efficiency can be less efficient than the outcome with a planner whose social welfare function also gives weight to poverty

who gets what from minimum wage hikes a re estimation of card and krueger s distributional analysis in myth and measurement the new economics of the minimum wage i ve studied the arguments and the evidence for and against a minimum wage increase i believe that the weight of the evidence is that a modest increase does not cost jobs and may even lure people into the job market but the most important thing is you can t make a living on 4 25 an hour president clinton state of the union address 1995

using regional variation in wages to measure the effects of the federal minimum wage the imposition of a national minimum wage standard provides a natural experiment in which the treatment effect varies across states depending on the fraction of workers initially earning less than the new minimum the author exploits this fact to evaluate the effect of the april 1990 increase in the federal minimum wage on teenagers wages employment and school enrollment comparisons of grouped and individual state data confirm that the rise in the minimum wage increased teenagers wages there is no evidence of corresponding losses in teenage employment or changes in teenage school enrollment

wage dispersion and productive efficiency evidence for sweden the swedish record of enormous compression of relative wages under centralized solidarity bargaining followed by substantial decompression of wages after central bargaining broke down supplies observations well suited to empirical evaluation of arguments about the response of productive efficiency to shifts in wage distribution we obtain no results supporting fairness morale and cohesiveness theories implying that wage leveling within workplaces and industries may enhance productivity reduction of interindustry wage differentials evidently did however contribute positively to aggregate output and productivity growth most likely for the structural reasons first emphasized by swedish trade union economists almost a half century ago

financial crashes as endogenous jumps estimation testing and forecasting abstract this paper provides an econometric approach for forecasting financial crashes based on diffusion processes with time varying parameters that are driven by market fundamentals under a polynomial drift function one obtains a cusp stochastic process that entails a generalized exponential stationary distribution this class of densities is quite convenient as it allows for skewness different tail shapes and even multimodality which corresponds to multiple equilibria movements from one equilibrium to another due to changes in the market fundamentals then relates to crashes methods for fitting and evaluating this sort of diffusion processes are proposed to enable the estimation and forecast of crash events finally an empirical assessment is carried out by tracking the likelihood of a crash during the swedish twin crises in the early 1990s

equal pay for unequal work swedish labor unions pursue an egalitarian wage policy and have successfully squeezed wage differentials the effects in the short run are a rise in the wage of low paid unskilled labor as intended and possibly also of high paid skilled labor but in the long run labor s income share falls as does the wage of skilled labor and possibly even unskilled labor some unskilled labor becomes unemployed in both the short and long run resources are shifted into the export competing sector and away from the import competing sector

short term interest rates as subordinated diffusions in this article we cbaracterize and estimate the process for short term interest rates using federal funds interest rate data we presume that we are observing a discrete time sample of a stationary scalar diffusion we concentrate on a class of models in whicb the local volatility elasticity is constant and the drift has aflexible specufication to accommodate missing observations and to break the link between economic time and calendar time we model the sampling scheme as an increasing process that is not directly observed we propose and implement two new methods for estimation we find evidence for a volatility elasticity between one and onehalf and two when interest rates are high local mean reversion is smaul and the mechanism for inducing stationarity is the increased volatility of the diffusion process

the impact of minimum wages in mexico and colombia there are diverging views about how minimum wages affect labor markets in developing countries advocates of minimum wages hold that they redistribute resources in a welfare enhancing way and can thus reduce poverty improve productivity and foster growth opponents on the other hand contend that minimum wage interventions result in a misallocation of labor and lead to depressed wages in the very sectors the rural and informal urban sectors where most of the poor are found with the effect of wasting resources and reducing the growth rate data from colombia and mexico for the 1980s provide an opportunity to evaluate the impact of minimum wages in mexico in the 1980s the minimum wage fell in real terms roughly 45 percent by 1990 mexico s minimum wage was about 13 percent of the average unskilled manufacturing wage during the same period the minimum wage in colombia increased at nearly the same rate reaching roughly 53 percent of the average unskilled wage the author charts how the mandated minimum wage affected the demand for skilled and unskilled labor in both countries during that decade findings are as follows in mexico minimum wages have had virtually no effect on wages or employment in the formal sector the main reason the minimum wage is not an effective wage for most firms or workers in the informal sector in turn there is considerable noncompliance with the mandated minimum wage especially among part time and female workers as a result significant numbers of workers are paid at or below minimum wages in colombia minimum wages have a much stronger impact on wages judging from their proximity to the average wage and both cross section and time series estimates the estimates imply that the elasticity of low paid unskilled employment with respect to minimum wages is in the range of 2 to 12 percent

where the minimum wage bites hard introduction of minimum wages to a low wage sector between 1993 and april 1999 there was no minimum wage in the united kingdom except in agriculture in this paper we study the effects of the introduction of a national minimum wage nmw in april 1999 on one heavily affected sector the residential care homes industry this sector contains a large number of low paid workers and as such can be viewed as being very vulnerable to minimum wage legislation we look at the impact on both wages and employment our results suggest that the minimum wage raised the wages of a large number of care home workers causing a very big wage compression of the lower end of the wage distribution thereby strongly reducing wage inequality there is some evidence of employment and hours reductions after the minimum wage introduction though the estimated effects are not that sizable given how heavily the wage structure was affected

the informal sector elephant abstract different analysts have used the term informal sector to mean different things a data set with 2 200 small enterprises chosen using random procedures in seven countries makes it possible to test the relationships between different measures the analysis finds only limited parallels between definitions based on size on registration on conformity to fiscal and other regulations and on degrees of modernization wide variations appear from one country to another the term may be appropriate for examination of individual countries especially if the analyst defines it precisely but its use in multicountry analysis is fraught with difficulties

turning a blind eye costly enforcement credible commitment and minimum wage laws in many countries non compliance with minimum wage legislation is widespread and authorities may be seen as having turned a blind eye to a legislation that they have themselves passed but if enforcement is imperfect how effective can a minimum wage be and if non compliance is widespread why not revise the minimum wage this paper examines a minimum wage policy in a model with imperfect competition imperfect enforcement and imperfect commitment and argues that it is the combination of all three that produces results which are consistent with a wide range of stylized facts that would otherwise be difficult to explain within a single framework we demonstrate that turning a blind eye can indeed be an equilibrium phenomenon with rational expectations subject to an ex post credibility constraint since credible enforcement requires in effect a credible promise to execute ex post a costly transfer of income from employers to workers a government with an objective function giving full weight to efficiency but none to distribution is shown paradoxically to be unable to credibly elicit efficiency improvements via a minimum wage reform

compliance and enforcement decisions under the national labor relations act this article analyzes the growth of regulatory litigation under the national labor relations act by modeling the compliance and enforcement decisions made by the employers unions and workers covered by the act an empirical analysis of the model on time series data for 1950 80 confirms the importance of compliance and enforcement incentives in explaining the growth of unfair labor practice charges while some actions of the national labor relations board the regulatory agency established by the act influence these incentives and the resulting regulatory litigation changes in some important incentives notably relative labor costs are beyond the board s influence

minimum wage effects throughout the wage distribution this paper provides evidence on a wide set of margins along which labor markets can adjust in response to increases in the minimum wage including wages hours employment and ultimately labor income not surprisingly the evidence indicates that low wage workers are most strongly affected while higher wage workers are little affected workers who initially earn near the minimum wage experience wage gains nevertheless their hours and employment decline and the combined effect of these changes on earned income suggests adverse consequences on net for low wage workers

the effect of minimum wages on actual wages in formal and informal sectors in costa rica summary as in many economies wage gaps between formal and informal sectors have been persistent in costa rica using 12 years of microdata we test whether increases in minimum wages raise actual wages we find they not only raise wages in large urban and rural enterprises traditionally referred to as formal but they also raise wages of workers covered by minimum wage legislation in what are traditionally regarded as informal sectors where the legislation is often considered not to be enforced small urban and small rural enterprises furthermore minimum wages raise wages in these informal sectors more than in larger firms and hence work to reduce wage differentials between the larger and smaller firms however minimum wages have no significant impact on wages in the informal sector not covered by minimum wage legislation the self employed

dynamic hedging and extreme asset co movements the paper investigates the portfolio allocation effects of increased asset co movements during market downturns we develop a model for the stock price process that allows for increased and asymmetric dependence between extreme return realizations we isolate the portfolio hedging demands that arise due to extreme co movements and find a substantial shift of the portfolio holdings toward the risk free asset we demonstrate that accounting for dependence between extreme events in portfolio decisions leads to significant economic gains that stem primarily from intertemporal hedging motives these findings are robust along alternative modeling assumptions of extreme co movements and conditional correlation

fiscal policy and the structure of production in a two sector developing economy abstract this paper develops a two sector model of a developing economy and examines the role of the informal sector in limiting the government s ability to increase tax revenues a key feature is the introduction of auditing of the informal sector and degree of tax enforcement in that sector we emphasize the interdependence between tax policy and enforcement in achieving a developing economy s fiscal objectives and show that by judicious policy choices the presence of the informal sector need not hinder its ability to raise tax revenues we supplement the formal analysis with numerical simulations highlighting the contrasting intertemporal tradeoffs implied by higher tax rates and tax enforcement levels

institutions and investors the politics of the economic crisis in southeast asia the most dramatic development in the international political economy during the 1990s the asian economic crisis deserves our attention given that asia s rapid economic rise spawned so many debates in the literature it is peculiar that a radical interruption to asia s economic development has not engendered more theoretical argument among political scientists economists have engaged in furious and productive debate but have been unable to deal with the political dimensions of the crisis in this article i make a strong claim about the importance of politics in explaining one of the big puzzles in the overall saga why the investment reversal was greater in some countries than in others i argue that a tight focus on political institutions yields a remarkable degree of analytic purchase in explaining why some countries coped better than others during the crisis specie cally i stress the distribution of veto authority highlighting the way this shaped the overall character of the policy environment and in turn affected investors i identify two policy syndromes rigidity and volatility that are at opposite ends of a continuum and are severely suboptimal for investors particularly during times of crisis i show that these two syndromes can be directly linked to the institutional framework of government the wider the dispersal of veto authority the greater the risk of policy rigidity conversely the tighter the concentration of veto authority the greater the risk of policy volatility these two policy syndromes bear directly on the differing responses of governments to the crisis much of the best literature on the asian crisis has come from economists and falls into one of three theoretical clusters variants of e rst generation currency crisis models that emphasize imbalances in macroeconomic fundamentals variants of

throwing out the bums protest voting and unorthodox parties after communism the electoral rise of unorthodox parties uop s in recent east european elections raises some puzzling questions about electoral dynamics in new democracies why did the power alternation of the mid 1990s not result in party system consolidation as suggested by some earlier studies but instead give way to a much more chaotic environment in which established mainstream political parties lost considerable ground to new political formations based on personalist and populist appeals why did this reversal in eastern europe happen during a period of economic recovery remarkable western integration progress and a broad acceptance of electoral democracy as the only game in town this article suggests that these electoral dynamics can be explained by focusing on the interaction between protest voting and election sequence while protest voting to punish unpopular incumbents has been a widespread but understudied practice since the collapse of communism the beneficiaries of these protest votes have changed in recent elections whereas in the first two generations of postcommunist elections disgruntled voters could opt for untried mainstream alternatives in third generation elections defined as elections taking place after at least two different ideological camps have governed in the postcommunist period voters had fewer untried mainstream alternatives and therefore opted in greater number for unorthodox parties this explanation receives strong empirical support from statistical tests using aggregate data from seventy six parliamentary elections in fourteen east european countries from 1990 to 2006 survey evidence from twelve postcommunist elections from 1996 to 2004 and a survey experiment in bulgaria in 2008

famous first bubbles t he jargon of economics and finance contains numerous colorful expressions to denote a market determined asset price at odds with any reasonable economic explanation such words as tulip mania bubble chain letter ponzi scheme panic crash and financial crisis immediately evoke images of frenzied and probably irrational speculative activity many of these terms have emerged from specific speculative episodes which have been sufficiently frequent and important that they underpin a strong current belief among economists that key capital markets sometimes generate irrational and inefficient pricing and allocational outcomes before economists relegate a speculative event to the inexplicable or bubble category however we must exhaust all reasonable economic explanations while such explanations are often not easily generated due to the inherent complexity of economic phenomena the business of economists is to find clever fundamental market explanations for events and our methodology should always require that we search intensively for market fundamental explanations before clutching the bubble last resort thus among the reasonable or market fundamental explanations i would include the perception of an increased probability of large returns the perception might be triggered by genuine economic good news by a convincing new economic theory about payoffs or by a fraud launched by insiders acting strategically to trick investors it might also be triggered by uninformed market participants correctly inferring changes in the distribution of dividends by observing price movements generated by the trading of informed insiders while some of these perceptions might

estimating the density tail index for financial time series the tail index of a density has been widely used as an indicator of the probability of getting a large deviation in a random variable most of the theory underlying popular estimators of it assume that the data are independently and identically distributed i i d however many recent applications of the estimator have been to financial data and such data tend to exhibit long range dependence we show via monte carlo simulations that conventional measures of the precision of the estimator which are based on the i i d assumption are greatly exaggerated when such dependent data are used this conclusion also has implications for estimates of the likelihood of getting some extreme values and we illustrate the changed conclusions one would get using equity return data

the crash of ʼ87 was it expected the evidence from options markets transactions prices of s p 500 futures options over 1985 1987 are examined for evidence of expectations prior to october 1987 of an impending stock market crash first it is shown that out of the money puts became unusually expensive during the year preceding the crash second a model is derived for pricing american options on jump diffusion processes with systematic jump risk the jump diffusion parameters implicit in options prices indicate that a crash was expected and that implicit distributions were negatively skewed during october 1986 to august 1987 both approaches indicate no strong crash fears during the 2 months immediately preceding the crash attempts to explain what caused the stock market crashes around the world in october 1987 have suffered from the paucity of major economic developments occurring around that time that could have triggered the crashes shifting expectations regarding monetary policy foreign investors fears of a dollar decline increasing riskiness of assets none of these appeared major enough if present at all to explain the magnitude of the crashes and although portfolio insurance strategies could conceivably magnify the effects of a jump in fundamentals the initiating jump in fundamentals appears to be lacking

heterogeneous effects of imperfectly enforced minimum wages in low wage labor markets abstract we present minimum wage effects across different enforcement regimes exploiting state time variation and policy discontinuities at contiguous districts across state borders in india we show that the effect of minimum wages on wages and employment significantly increases with an increase in enforcement in weak enforcement regimes estimated wage effects are negligible and employment effects are negative or null in stricter regimes wage effects are positive and strong and employment effects are positive or null in most specifications these results are consistent with theories on imperfect enforcement in monopsonistic labor markets and are robust to alternative definitions of enforcement and employment and employing instrumental variables for enforcement

uma avaliacao dos impactos do salario minimo sobre o nivel de pobreza metropolitana no brasil this paper estimates the impact of recent minimum wage adjustments on poverty level for the six major brazilian metropolitan areas we make a decomposition of the observed variation on poverty level registered for a sample of longitudinal data based on a monthly employment survey pme ibge according to the decomposition we point the share of the observed variation on poverty level due to the wage and ocupational status variation of workers affected by the minimum legislation we break the decomposition in several steps to be able to consider several alternatives of the group of workers affected by the minimum wage legislation we have evidences of significant impacts of minimum wage on poverty level for metropolitan areas the medium elasticity for the period analyzed 1995 1998 was approximately 0 4 when this effect is incorporated which means that in the very short run poverty rises in brazilian metropolitan areas when the value of the minimum wage is increased

the impact of labor market regulations the authors investigate the impact of labor market regulations in settings where compliance is incomplete they review some stylized facts about labor market behavior present an analytical model that may explain such behavior and provide a checklist for assessing the distortionary impact of a regulation such as the minimum wage they take as their starting point the limited evidence about the distortionary effects of such regulations and argue that there may be natural limits on the efficiency losses engendered by labor market regulations first the regulations may not be binding at market equilibrium for example minimum wages may be set so low that they are ineffective second even if they are binding the relevant elasticities of supply and demand may be so low that the regulations have little impact on efficiency third even if the regulations are binding and elasticities are sizable compliance may be low the authors argue that the likelihood of compliance will be greatest when the regulations are binding and the relevant elasticities are sizable that is if the distortionary costs of regulations are not rendered insignificant by the first two reasons then the returns to noncompliance will be high and other things being equal employers will evade or avoid the regulations thereby minimizing the imact on efficiency the argument rests on profit maximization subject to a hard budget constraint public enterprises which are not concerned only with profit maximization and often have softer budget constraints than the private sector may be more willing to conform to profit reducing regulations but in this case the authors argue that compliance may reduce already existing efficiency losses

contractual dualism market power and informality we develop a search theoretic model of contractual dualism in formal and informal labour markets the model i provides the micro underpinnings for endogenous determination of employer market power in the formal and informal sectors ii offers a unified and coherent set up whereby a host of salient features of developing country labour markets can be explained together and iii places for the first time the stiglerian prescription of the optimal unemployment minimising minimum wage in the broader context of labour markets where formal job creation is costly where employer market power is endogenous and where formal employment informal employment and unemployment coexist

some evidence on cross sector effects of the minimum wage this paper tests mincer s minimum wage model by estimating reduced form wage and employment equations for both the covered and uncovered sectors in nine regions of the united states as theory predicts in regions with comparatively small covered sector demand elasticities the northern and midwestern regions the uncovered sector wage increases after a minimum wage hike and in regions with comparatively large demand elasticities the southern and western regions the uncovered sector wage decreases because of data limitations the uncovered sector employment effect could not be estimated sharply and so its relationship to the covered sector demand elasticity is weak

v goods and the role of the urban informal sector in development this paper analyzes the role of the urban informal sector in a developing country in relation to the performance of agriculture and other rural activities on the one hand and that of urban formal sector activities on the other it decomposes the sectors into traditional and modernizing components traceable to production and consumption linkages with the rest of the economy as well as the character of government interventions over time the paper contrasts success cases a la taiwan in which the overall size of the urban informal sector remains modest the modernizing sub sector grows in relative importance and the end of overall labor surplus is reached rather early with non success cases a la the philippines in which rapid rural urban migration enhances the overall size of the urban informal sector the traditional sub sector grows relatively and the end of the labor surplus condition is substantially delayed authors

the effects of the minimum wage in brazil on the distribution of family incomes 1996 2001 abstract the brazilian economy has long relied on the minimum wage having first implemented a minimum in 1940 shortly after taking office in 2003 brazil s president raised the minimum wage by 20 and promised to double the value of the minimum wage before his term ends in 2006 the usual rationale for minimum wage increases is to bring about beneficial changes in the income distribution by raising incomes of poor and low income families the goal of this paper is to evaluate the efficacy of the minimum wage in brazil in bringing about these changes in the income distribution we examine data drawn from brazil s major metropolitan areas studying the years after brazil s hyper inflation ended the estimates provide no evidence that minimum wages in brazil lift family incomes at the lower points of the income distribution if anything some of the evidence points to adverse effects on lower income families

impact of labor market regulations this article investigates the impact of labor market regulations in a setting with incomplete compliance it takes as its starting point the limited evidence regarding the distortionary costs of labor market regulations and argues that there may exist natural limits to the efficiency losses engendered by such regulations the article reviews some stylized facts regarding labor market behavior presents an analytical model that may explain such behavior and provides a checklist for assessing the distortionary impact of regulations such as minimum wages

do minimum wages fight poverty i introduction one of the most compelling rationales for a national minimum wage floor is to raise the incomes of poor or near poor families with members in the workforce this general point however is often missed in the debates over the merits of a higher minimum wage in contrast to these oft stated distributional goals much of the focus in such debates has been on the employment effects of minimum wages especially among the teenage population in large part this focus is probably attributable to the extensive body of economic research on the effects of minimum wages on employment of low skilled workers however although negative employment effects represent a cost of minimum wages such costs do not necessarily imply that minimum wages constitute bad social policy in particular the employment losses associated with a higher minimum wage may be more than offset by positive effects on low income families especially if minimum wages are a significant factor in helping move families out of poverty 1 this is not to argue that research on employment effects of minimum wages is irrelevant but such research may be more important as a test of the theory of labor demand and as a method of learning how employers and individuals adjust to exogenous wage increases than as a method of assessing the wisdom of the policy in addition we do not mean to suggest that the short run effects of minimum wages on the incomes of poor families should be the sole criterion for evaluating such policies other studies have found evidence suggesting for example that minimum wage increases reduce school enrollment rates and training neumark and wascher 1996a hashimoto 1982 factors that may affect longer run earnings or earnings growth these deleterious longer run effects might offset the benefits of shorter run effects of minimum wages on family incomes nonetheless our perception is that potential increases in the incomes of poor families provide the main motivation for raising the minimum wage making it important to assess the evidence on whether minimum wage increases achieve this goal in this regard there are two questions that pertain to the influence of minimum wages on family incomes generally and on poverty in particular first there is the question of the effects of minimum wages on low wage workers that is do the wage gains received by employed workers more than offset the lost earnings suffered by those who lose or cannot find jobs 2 second there is the question of how minimum wages affect workers in different parts of the family income distribution because many roughly speaking a large minority of minimum wage workers are in relatively affluent families gramlich 1976 card and krueger 1995 burkhauser et al 1996 which workers gain and which lose will have an important influence on the effects of minimum wages on the distribution of family incomes in this article we present evidence on the effects of minimum wages on family incomes focusing in particular but not solely on the effectiveness of minimum wages in reducing poverty using matched march current population surveys cpss we estimate the effects of minimum wages on the probabilities of various transitions in the family income distribution such as transitions into and out of poverty given that federal changes in minimum wages may be confounded with other aggregate level shocks influencing family income we rely heavily on state level changes in minimum wages to identify minimum wage effects in a nutshell our empirical strategy is to compare rates of transition through the family income distribution in states in which minimum wages do and do not increase for example if poor families are more likely to escape from poverty when minimum wages increase in their states of residence we would infer that minimum wage hikes help families move out of poverty on the other hand if transitions in to poverty are more common when minimum wages increase we would infer that the disemployment effects of minimum wages play a dominant role among the low income population

minimum wages globalization and poverty in honduras summary we test whether minimum wage legislation is an effective poverty reduction tool in a poor country trying to stay competitive in the global economy in honduras increases in relatively high minimum wages lead to reductions in poverty especially extreme poverty however the impact is felt only in households with workers in large firms and felt more strongly among those with low wage workers increases in the minimum do not affect poverty in sectors where minimum wages are not enforced or do not apply hence minimum wages can be a poverty reduction tool in the formal sector which competes globally

minimum wages and poverty in a developing country simulations from indonesia s household survey summary this study focuses on minimum wages income distribution and poverty taking indonesia as a case study a simulation approach assesses who benefits and who pays for minimum wage increases among the poor a minimum wages increase boosts net incomes for 21 of the households while it results in net losses to 79 of the households the impact is slightly less severe when there are job losses although minimum wage increases are mildly progressive the non poor pay a higher share of the costs they are unlikely to be an effective antipoverty instrument in developing countries like indonesia

minimum wages for ronald mcdonald monopsonies a theory of monopsonistic competition recent empirical work on the effects of minimum wages has called into question the conventional wisdom that minimum wages invariably reduce employment we develop a model of monopsonistic competition with free entry to analyse the effects of minimum wages and our predictions fit the empirical results closely under monopsonistic competition we find that a rise in the minimum wage raises employment per firm causes firm exit and may increase or reduce industry employment minimum wages increase welfare if they raise industry employment but welfare effects are ambiguous if employment falls

trade and labour standards will there be a race to the bottom the objective of this paper is to investigate whether international rivalry will lead to a race to the bottom rtb in labour standards we derive the equilibrium levels of labour standards in an environment that is most conducive to a rtb specifically the brander and spencer 1985 model of strategic trade in which each government has an incentive to lower the cost of a domestic firm our analysis suggests that strategic trade considerations do not lead to a rtb in labour standards to the contrary equilibrium labour standards are higher than those in the absence of government intervention in the case where governments are free to choose the rate of an export subsidy labour standards are inefficiently high binding global trade rules that reduce the subsidy rate would move the equilibrium labour standards closer to their efficient level and a prohibition of the subsidy would eliminate the efficiency loss in labour markets

oligopsony and monopsonistic competition in labor markets we argue that models of oligopsony or monopsonistic competition provide insights and explanation for many empirical phenomena in labor markets using a simple model with job differentiation and preference heterogeneity we illustrate how such models can be employed to explain the existence of wage dispersion the persistence of labor market discrimination market failures in the provision of training and the anomalous employment effects of minimum wages

coping by colluding political uncertainty and promiscuous powersharing in indonesia and bolivia democracy forces political elites to compete for power in elections but it also often presses them to share power after the electoral dust has settled at times these powersharing arrangements prove so encompassing as to make a mockery of putative partisan differences and even to wipe out political opposition entirely by bringing every significant party into a party cartel such promiscuous powersharing arrangements undermine representation by loosening parties commitments to their core constituents and threaten accountability by limiting voters capacity to remove parties from power via the ballot box in the otherwise deeply disparate cases of indonesia and bolivia the origins of promiscuous powersharing can be traced to similar periods of high political uncertainty surrounding crisis wracked transitions to democracy party elites coped with the uncertainties of transition and crisis by sharing executive power across the country s most salient political cleavages these arrangements forged an eli

the perverse effects of wage and price controls in search markets abstract this paper examines the effects of price ceilings and minimum wages on the performance of markets in which agents must invest in costly search to become informed about prices or wages in this context it is found that the market equilibrium may respond to changes in policy instruments in strikingly counterintuitive ways in particular the imposition of price ceilings and minimum wages may respectively result in consumer price increases and wage decreases thus an important implication of our analysis is that when unions fight to increase wages by raising the minimum wage they may paradoxically actually be reducing the average wage of its members

on the economics of compliance with the minimum wage law this paper reexamines the issues of compliance with and enforcement of the minimum wage law recently addressed in this journal by ashenfelter and smith and by grenier pursuing a more rigorous methodology we are able to add new general conclusions and correct and reconcile some previous conflicting conclusions concerning the role of the disparity between the minimum and free market wages the level and elasticity of labor demand and the magnitude of deterring monetary sanctions on the noncompliance decision our formulation also addresses the law evasion reduced wages as well as the law avoidance modified employment aspects of the noncompliance decision which previous formulations have ignored

minimum wage noncompliance and the employment decision the employment effects of minimum wage noncompliance have been the focus of several theoretical contributions to the minimum wage literature the dominating conclusion being that the noncomplying employer while reducing employment below the free market level will still employ more labor than he would if complying allowing however for partial compliance this study applies a portfolio choice approach to the employer s problem concluding surprisingly that the minimum wage law may give rise to a full compliance employment effect even if it is partially evaded this result is further shown to hold with regard to labor market laws in general

a non linear model of the real us uk exchange rate this paper provides a framework for building and estimating non linear real exchange rate models the approach derives the stationary distribution from a continuous time error correction model and estimates this by mle methods the derived distribution exhibits a wide variety of distributional shapes including multimodality the main result is that swings in the us uk rate over the period 1973 3 to 1990 5 can be attributed to the distribution becoming bimodal with the rate switching between equilibria by capturing these changes in the distribution the non linear model yields improvements over the random walk the speculative efficiency model and hamilton s stochastic segmented trends model

theory and evidence on the political economy of the minimum wage this paper examines how closely the minimum wage has been set to the most popularly stated goals of minimun wage policy i first estimate these goals the minimum wage rate at which the relevant labor demand is unitary elastic maximizing the total earnings of minimum wage workers about 5 35 and the level that would lift a typical minimum wage worker s family out of poverty about 5 17 i can reject that the actual minimum wage policy has been driven by desire to achieve these goals and find that a simple interest group model best explains the historical path of the minimum wage rate

the nature of minimum wages and their effectiveness as a wage floor in costa rica 1976 1991 abstract this study describes costa rica s complex minimum wage system and its evolution over 1976 1991 examines the trend in minimum wage to average wage in eight industries and compares the number and characteristics of workers who earn below the minimum wage over these 16 years in the covered and uncovered sectors we conclude that noncompliance is a major problem on average one third of the workers in the legally covered sector earn below the minimum wage over this period moreover the same proportion earns below the minimum wage in the uncovered sectors this evidence indicates that the law may fail its intent of assuring an adequate salary to workers without bargaining power

estimating the impact of minimum wages on employment wages and non wage benefits the case of agriculture in south africa assessments of the impact of minimum wages on labor market outcomes in africa are relatively rare in part this is because the available data do not permit adequate treatment of econometric issues that arise in such assessments this paper however attempts to estimate the impact of introducing a minimum wage law in the agriculture sector in south africa based on 15 waves of the biannual labor force survey conducted between september 2000 and september 2007 the chosen sample includes six waves before the legislation s effective date march 2003 and nine afterwards to assess whether the changes experienced by farm workers are unique we identify a control group that has similar characteristics to the treatment group our econometric approach involves using two alternative specifications of a difference in differences model we test whether employers reduced employment and whether they responded at the intensive margin by reducing hours of work the results suggest a significant employment reduction in agriculture from the minimum wage and particularly a noticeable move away from employment of part time workers an increase in wages on average and a rise in non wage benefits compliance our analysis also indicates that firstly overall average of hours worked fell in the post law period suggesting that employers adjusted to some extent on the intensive margin secondly it appears that hours of work increased more in areas where wages were lower in the pre law period driven largely by the fall in part time employment

the consequences of increased enforcement of legal minimum wages in a developing country an evaluation of the impact of the campana nacional de salarios minimos in costa rica in august 2010 the costa rican government implemented a comprehensive program to increase compliance with legal minimum wages the campana nacional de salarios minimos national campaign for minimum wages to evaluate the impact of the campaign the authors use a regression discontinuity rd approach which compares what happened to workers who before the campaign had been earning below the minimum wage to those who before the campaign had been earning above the minimum wage they analyze a panel data set with information on workers from before the campaign began july 2010 and after the campaign had been in operation for some time july 2011 the evidence supports the conclusion that the campaign led to an increase in compliance with minimum wage laws in costa rica the mean earnings of those being paid less than the minimum wage in 2010 increased by approximately 10 more than the earnings of those being paid more than the minimum wage the campaign led to the largest increases in the wages of wome

political parties and uncertainty in developing democracies this article lays out a theoretical framework for understanding the effects of political uncertainty on party development and strategies of mobilization and competition defining uncertainty as the imprecision with which political actors are able to predict future interactions the authors identify three types of political uncertainty regime uncertainty economic uncertainty and institutional uncertainty they argue that political uncertainty is particularly high among developing democracies contributing to puzzling empirical patterns of party development and competition in these contexts taking into account the role of uncertainty in the strategic decision making of party elites will help scholars better understand the differences between parties in advanced and developing democracies but it can also help scholars understand the less dramatic differences between parties even within advanced democracies the authors theoretical framework can be applied broadly since uncertainty informs the strategic

nairobi s informal sector dynamic entrepreneurs or surplus labor the 1972 international labour office ilo report on kenya and its use of the term informal sector sparked off a great deal of controversy in the development literature over the meaning and usefulness of such a concept some critics have argued that the motivations and activities of participants in what is called the informal sector are so fundamentally diverse in nature that to write of a single sector which can be usefully incorporated in models of the urban economy of ldcs is fruitless partly as a response to these critics others have disaggregated the urban economy into two or three subsectors which are then used to analyze the interdependence and explain the dynamics of the urban labor market through time unfortunately the empirical base for testing these models and resolving some of these arguments is extremely sketchy and in most cases nonexistent in a partial attempt to fill this lacuna especially in kenya a survey of informal sector enterprises in nairobi was launched in mid 1977 the results of the survey are used to test some general hypotheses about the sector and the paper offers an alternative view of the role of the sector in the urban economy of an ldc with particular reference to kenya

a pareto improving minimum wage this paper shows that a graduated minimum wage in contrast to a constant minimum wage can provide a strict pareto improvement over what can be achieved with an optimal income tax the reason is that a graduated minimum wage requires high productivity workers to work more to earn the same income as low productivity workers which makes it more difficult for the former to mimic the latter in effect a graduated minimum wage allows the low productivity workers to benefit from second degree price discrimination which increases their income

does the minimum wage have a higher impact on the informal than on the formal labour market evidence from quasi experiments this article investigates a puzzle in the literature on labour markets in developing countries labour legislations not only have an impact on the formal labour market but also an impact on the informal sector it has even been argued that the impact on the informal sector in the case of the minimum wage is stronger than on the formal sector using quasi experiments of minimum wage changes and thereby exploiting geographical variation of the minimum wage bite i find evidence for this hypothesis informal workers workers without social security contribution experienced significant wage increases when the minimum wage was raised while formal workers did not this result highlights that noncompliance with one labour legislation the social security contribution does not necessarily imply noncompliance to other labour laws such as the minimum wage

minimum wage impacts on wages and hours worked of low income workers in ecuador abstract minimum wage policy aims to raise the real income of low wage workers low wage individuals may be adversely affected by minimum wages however although the empirical evidence on this point is not without controversy we analyzed the effects of the january 2012 increase in monthly minimum wages on the wages and hours worked of low wage workers in ecuador individuals could have chosen to enter occupations covered by minimum wage legislation or those that were not we applied a difference in differences estimation to account for potential self selection bias we also relied on exogenous variations in minimum wages by sector industry and occupation we constructed individual panel data from a household panel and performed estimates that also accounted for potential sample selection bias the results suggest a significant and positive effect on the wages of treated workers increasing them by 0 41 0 48 for each 1 increase in minimum wages relative to the earnings of control workers our results also suggest that effects varied by type of worker i women workers received lower wage increases and their hours worked were significantly and negatively affected both of which may suggest a failure of the minimum wage to reduce the gender wage gap at the bottom of the distribution and ii the hours worked by young workers were significantly and positively affected a result that is in agreement with results found elsewhere in the literature these results persisted after applying robustness checks to account for different control groups full vs part time jobs separate regressions for heterogeneous groups and tests for potential attrition and sample selection bias the range of effects observed across disparate groups of workers suggests areas in which policy change could be useful the income compression effect we found suggests that further studies should address the effects of minimum wage on the drop in income inequality observed in the data

market liquidity hedging and crashes in the absence of significant news hedging strategies were blamed for the stock market crash of october 1987 but traditional models cannot explain how a relatively small amount of selling could cause so large a price drop the authors develop a rational expectations model in which prices play an important role in shaping expectations markets are much less liquid in their model than in traditional models discontinuities or crashes can occur even with relatively little hedging the model is consistent with theories as disparate as keynes beauty contest insights and thom s catastrophe analysis and suggests means to reduce volatility copyright 1990 by american economic association

evidence on the impact of minimum wage laws in an informal sector domestic workers in south africa what happens when a previously uncovered labor market is regulated we exploit the introduction of a minimum wage in south africa and variation in the intensity of this law to identify increases in wages for domestic workers and no statistically significant effects on employment on the intensive or extensive margins these large partial responses to the law are somewhat surprising given the lack of monitoring and enforcement in this informal sector we interpret these changes as evidence that strong external sanctions are not necessary for new labor legislation to have a significant impact on informal sectors of developing countries at least in the short run