International Labour Review98
with the fact that these countries have dissimilar occupational structures, make
for a particularly rich analysis.
This article is also of interest for three further reasons. First, there are
diverging theoretical arguments regarding the impact of the minimum wage
on the labour market, which calls for empirical studies to be carried out to
determine which of the different theories is valid in specic contexts. Second,
empirical studies carried out on Latin American economies, using a variety
of estimation methodologies and indicators, have yielded very mixed results.
Therefore, a comparative study of different cases, based on the same method-
ology, should provide more useful guidance on the effects of minimum wage
policies. Third, most of the studies on the region focus on the role of returns
to education in the dynamics of wage distribution, both in the 1990s and sub-
sequently, placing little emphasis on labour institutions. However, given the
strong rise in the minimum wage during the 2000s, one might imagine that
this would also have an effect on wage inequality. Moreover, it is possible that
not only the minimum wage but also other labour institutions and regulations
affected the returns to different individual attributes, including human capital.
For this reason, in-depth analysis of the minimum wage is a valuable comple-
ment to existing wage distribution studies for Latin America.
To estimate the effect of an increase in the real value of the minimum
wage on wage inequality in 2000 –12 for the four countries studied, we use the
methodology proposed by DiNardo, Fortin and Lemieux (1996). These authors
use a semiparametric method for estimating counterfactual density functions
to assess how the wage distribution would have been in 1988 if, keeping indi-
vidual attributes constant, the real minimum wage had been that prevailing in
1979, which was 27 per cent higher.
The results obtained in this article suggest that the increase in the value
of the real minimum wage had an equalizing effect in Argentina, Brazil and
Uruguay, while in Chile the effects were not signicant. As expected, in the
rst three countries, the decline in wage inequality was associated exclusively
with greater wage compression at the lower tail of the distribution.
We should point out some limitations relating to the methodology used
and hence the results obtained. First, our study ignores the potential negative
effects that an increase in the minimum wage can have on employment
levels. As Bosch and Manacorda (2010) state, it is not possible to distinguish
between a truncation effect on the wage distribution, i.e. the loss of jobs pay-
ing wages below the minimum as a result of a higher minimum wage, and a
censoring effect, whereby the minimum wage causes the wages of those initially
making less than the minimum to rise to exactly the level of the wage oor.
However, although a priori we should not ignore these potential employ-
ment effects, it is important to note that the period under review was charac-
terized by high job growth in the countries studied (Maurizio, 2015; Perazzo,
2012; Beccaria and Maurizio, 2012; Amarante, Colafranceschi and Vigorito,
2014). This was particularly true in Argentina, Brazil and Uruguay, and was
accompanied by a strong process of labour formalization (Amarante and Arim,