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Social policies in Ecuador: the effects of minimum wages and cash transfers

Guzman, Wilson (2018) Social policies in Ecuador: the effects of minimum wages and cash transfers. PhD thesis, London School of Economics and Political Science.

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Minimum wages and cash transfer (CT) programmes are two major social protection policies in developing countries aimed at alleviating poverty and redistributing income. While a lot of attention, and debate, has been put in place around the establishment of these policies, little attention has called the issue of how these policies have been implemented in practice. In the first part of this thesis, I evaluate the effects of the national minimum wage (NMW) policy of Ecuador where apart from registering increases in the legislated level of the minimum wage there are also increases in the intensity of its enforcement. In the second part, I evaluate the impact of the largest CT programme in the country, the Bono de Desarrollo Humano (BDH), which has no enforced conditionalities attached to it. In Part I, I provide evidence of the effects of increases in the two components of the NMW on employment, wages and monetary poverty (Chapters 2), and on wage inequality (Chapter 3). The findings go in line with the predictions of the traditional competitive two-sector model. In Chapter 2, I find that the increases in the two components of the NMW policy increased wages of male covered workers and reduced the probability of remaining employed in the covered sector for the less-skilled workers, the labourers. The increase in wages for male covered workers, who remained employed in the covered sector, reduced the probability of being poor for this group of workers and their families. I find that most of the labourers who lost their jobs in the covered sector migrated to the uncovered sector and others became unemployed. Additionally, I find that the increase in labour supply in the uncovered sector reduced the earnings of uncovered self-employed individuals. In Chapter 3, I find that the increases in the two components of the NMW policy reduced wage inequality by increasing the wages of workers located up through the 60th percentile of the wage distribution. Additionally, I estimate that the increases in the two components of the NMW account for approximately 50% of the reduction in wage inequality we observe for the period 2000-2016. In Part II, Chapter 4, I analyse the effects of the BDH on the components of food expenditure and find that the programme increased food expenditure on protein-rich products such as meat, chicken, milk, eggs, etc. Additionally, I find that the beneficiary families with under-5s spend significantly more on this kind of products and significantly less on sugar and sweets, and on meals outside the house. However, unlike other conditional CT programmes in the region, I did not find that the BDH increased expenditure on fruits and vegetables.

Item Type: Thesis (PhD)
Additional Information: © 2018 Wilson Guzman
Library of Congress subject classification: H Social Sciences > HN Social history and conditions. Social problems. Social reform
Sets: Departments > Social Policy
Supervisor: Jenkins, Stephen and Özcan, Berkay

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