Acta Universitatis Danubius. Œconomica, Vol 13, No 6 (2017)

Education and Wage Inequalities under a Counterfactual Scenario of Minimum Wage

Madalina Ecaterina Popescu, Eva Militaru

Abstract


The main purpose of this paper consists in quantifying the impact of a minimum wage adjustment upon wage inequality in Romania. In general, rigorous minimum wage impact assessment upon wage distribution is quite difficult to be conducted mainly because of data access limitations to longitudinal information available at individuals’ level. In this paper an innovative approach is proposed for building a counterfactual scenario through the use of quarterly survey micro-data provided by the National Institute of Statistics. The period analysed in this paper regards the time-interval Q2 2014-Q3 2014. There are several reasons for this choice. First, there were data availability restrictions and second, it was necessary to identify two consecutive periods corresponding to a window-frame right before a minimum wage adjustment and immediately after it took place.

In order to check the impact on gender wage inequalities, a 1:1 matching procedure was applied in order to build two distinct gender groups of individuals that are similar in observable characteristics. Both socio-demographic and economic factors are considered. When comparing the changes registered right after the minimum wage adjustment, we noticed a reduction in gender wage inequalities, as males’ chances to earn more in comparison to females drop.

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