Working Paper: CEPR ID: DP8682
Authors: Taryn Dinkelman; Vimal Ranchhod
Abstract: What happens when a previously uncovered labour 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 find no statistically significant effects on the intensive or extensive margins of work. 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 labour legislation to have a significant impact on informal sectors of developing countries, at least in the short-run.
Keywords: Africa; Domestic Workers; Informal Sector; Minimum Wage
JEL Codes: J08; J23; J38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of the minimum wage law (J38) | increase in domestic worker wages (J38) |
| introduction of the minimum wage law (J38) | no statistically significant reductions in hours of work (J22) |
| introduction of the minimum wage law (J38) | no changes in employment probability among low-skilled female workers (J79) |
| introduction of the minimum wage law (J38) | increase in probability of formal employment contracts (J41) |
| introduction of the minimum wage law (J38) | increase in unemployment insurance coverage (J65) |
| introduction of the minimum wage law (J38) | increase in pension contributions (H55) |