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Jorge Alvarez
A key feature of developing economies is that wages in agriculture are significantly below those of other sectors. Using Brazilian household surveys and administrative panel data, I use information on workers who switch sectors to decompose the drivers of this gap. I find that most of the gap is explained by differences in worker composition. The evidence speaks against the existence of large short-term gains from reallocating workers out of agriculture and favors recently proposed Roy models of inter-sector sorting. A calibrated sorting model of structural transformation can account for the wage gap level observed and its decline as the economy transitioned out of agriculture.
Jorge Alvarez

possibilities is a more likely explanation of the agricultural wage gap. A challenge in exploring this question is assessing the role of unobserved worker characteristics. For instance, if an agricultural worker and a non-agricultural worker with the same observable characteristics earn different wages, it is hard to distinguish whether the two sectors have differential pay for similar workers or whether the two workers have different unobserved characteristics. To make this distinction, the following strategy is adopted. First, using a collection of household surveys on

Mr. Leslie Lipschitz and Mr. Ichiro Otani

C − β P ) ( 6 ) From equation (6) we would thus expect a supply negatively related to price and positively related to cost. Costs, however, are a somewhat problematic concept in the context of South African gold mines. While the large majority of mine employees are recruited nonunionized labor, “skilled” employment is monopolized by domestic unionized labor. 33 Differential pay scales are entrenched by custom and “job reservation” law. 34 Any increase in the employment ratio, resulting from a relaxation of job

International Monetary Fund. European Dept.

maintain reasonable wage differentials, pay for workers above the minimum wage may also go up. And, minimum wage hikes may have signaling effects for the pace of wage increases in general. 18. The literature confirms that minimum wage increases typically push up the general wage level, but quantifications vary widely ( Table 1 ). There is evidence of both direct effects and ripple effects. Elasticities of general wages increases with respect to minimum wage hikes range from slight negative to some 0.8. Individual wage data for the U.S. point to a pass-through of 0

International Monetary Fund

nearby area, and at a lower cost ( Murthy and others 2001 ). The cases to date provide suggestive evidence that the most successful approaches base the contracts on specified outputs and outcomes, rather than inputs, and give contractors autonomy over how they use resources to produce the contracted outcomes—including the ability to offer differential pay to the public sector health workers they supervise and to hire and fire with greater flexibility. Contracting out services to private providers is not the only formula for strengthening performance incentives in

International Monetary Fund. European Dept.
This paper provides a cross-country report on minimum wages. In the past few years, many countries in Central Eastern and Southeastern Europe (CESEE) have increasingly turned to minimum wage policies. Throughout the region, statutory minimum wages had been in place at least since the early 1990s, but they were typically set at relatively moderate levels and affected relatively few workers. Minimum wages have risen sharply relative to both average wages and labor productivity. Minimum wages often affect relatively more workers in CESEE than in Western Europe. Governments are the key players in the minimum wage determination in CESEE countries.