Legal Minimum Wages and the Wages of Formal and Informal Sector Workers in Costa Rica



Table 3: Estimating the Effects of Minimum Wages on Wages, by Sector
(Dependent Variable: Log of Hourly Wage)

Coefficient on the Log of Real Minimum Wage
________(elasticity of wage to minimum wage)________

_______B

SE

N

R-squared

Covered Sectors

Urban Formal :

large enterprises___________

0^03a

- ~0~1i' ~ ~

"- 20o2440 ~

04354" "

Urban Informal 1:

small enterprises__________

0.149

0.096

7,211

0.2008

Rural Informal 1:

large enterprise____________

0.164a

0.038

33,538

0.3515

Rural Informal 2:

small enterprises__________

0.396a

0.111

20,300

0.1832

Uncovered Sectors

Urban Informal 2:

self-employed____________

“193

~ ~0~45 ~ "

9,560"

0""9""

Rural Informal 3:
self-employed

-0.047

ÔÏ38

21,775

0.1551

a = significant at 1%
b = significant at 5%

Notes:

1The data used in all regressions are weighted using the sample weights. Explanatory
variables in the regressions also include: dummy variables for each year, dummy
variables for each industry, occupation and skill category in the minimum wage legislation,
value-added by industry, and several individual-level variables including years of
education, potential experience, experience squared, experience cubed and gender along
with full interactions among these individual-level variables and the year dummies. See
Table A2 for full results.

2Reported significance levels are based on estimates of the standard errors that are
robust to heteroskedasticity and serial correlation and are corrected for clustering caused
by including both micro-level data and a more aggregated variable (the minimum wage
variable) in the regressions.

24



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