Wage–employment elasticity: a meta-analysis referring to Colombia

Abstract

Purpose

The article clarifies the wage–employment relation in a developing country. Several years ago, many articles in the United States indicated that the relation between increasing wages and increasing unemployment is unclear. These articles from the United States are insufficient to be applicable to all countries, especially developing countries such as Colombia where institutions and the wage–employment relation differ from those in the United States.

Design/methodology/approach

A meta-analysis methodology was used as 28 estimates of long-run wage–employment elasticity in Colombia from 1998 to 2016 were analyzed.

Findings

This article provides insights into how real wages affect employment. Despite publication biases, results showed that a 1% increase in wages results in a 0.11% decline in employment in the long run.

Research limitations/implications

Due to the publication bias, it is not considered how variables such as sectors, estimation strategies (panel data, partial adjustment, cointegration and non-linear least squares, among others), formal/informal urban sectors, government services and transportation, and qualified and unskilled workers affect the true elasticity value.

Practical implications

This paper includes implications for public policy because the results are important to minimum wages policy in a developing country.

Originality/value

There are no studies regarding the wage–employment relation in a developing country. The empirical results obtained in this article are useful for regulators, policy makers and researchers to understand whether employment is affected by real wages.

Citation

Mora, J.J. and Muro, J. (2020), "Wage–employment elasticity: a meta-analysis referring to Colombia", Journal of Economic Studies, Vol. 47 No. 6, pp. 1495-1505. https://doi.org/10.1108/JES-04-2019-0151