Minimum Wages, Inequality, and Globalization

The authors argue in this paper that the institution of the minimum wage is also an important factor in explaining changes in earnings inequality in Costa Rica, and that it can be an important factor in many developing countries. This study is a departure from the literature on institutions and development, which tends to analyze the impact of a more generally defined set of institutions using data on a number of countries. In this paper the authors analyze detailed changes in one institution in one country, using panel data over time. They argue that it is important to understand how institutions are structured when trying to measure their impact.