Nº 345 (February, 2025). Lucía Ramírez Leira, Octavio Bertín & Leonardo Gasparini

This paper analyzes the effect of the minimum wage on skill premiums in Latin America over the period 1997–2019. The canonical labor market model is extended to include the role of the minimum wage, following the approach proposed by Vogel (2023). Skill premiums are estimated through Two-Way Fixed Effects (TWFE) regressions using harmonized household survey microdata from 14 Latin American countries. Results suggest that increases in the minimum wage are associated with reductions in the skill premium between workers with and without higher education, but do not appear to have a significant effect on the gap between workers with medium and low levels of education. The largest effect of the minimum wage is observed for workers with higher levels of labor market experience. These findings contribute to recent evidence highlighting the role of labor institutions as one of the main drivers of the reduction in inequality in Latin America since the early 2000s.

JEL codes: J22, J31, J38, K31

Suggested citation: Ramírez Leira, L., O. Bertín & L. Gasparini (2025). Minimum Wages and Skill Premiums: Evidence for Latin America. CEDLAS Working Papers Nº 345, February, 2025, CEDLAS-FCE-Universidad Nacional de La Plata.