Journal
WORLD DEVELOPMENT
Volume 38, Issue 6, Pages 908-918Publisher
PERGAMON-ELSEVIER SCIENCE LTD
DOI: 10.1016/j.worlddev.2010.02.013
Keywords
minimum wages; poverty; Central America; Honduras
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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. (C) 2010 Elsevier Ltd. All rights reserved.
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