NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Alida Castillo-Freeman

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NBER Working Papers and Publications

January 1992When the Minimum Wage Really Bites: The Effect of the U.S.-Level Minimum on Puerto Rico
with Richard B. Freeman
in Immigration and the Workforce: Economic Consequences for the United States and Source Areas, George J. Borjas and Richard B. Freeman, editors
June 1991Minimum Wages in Puerto Rico: Textbook Case of a Wage Floor?
with Richard B. Freeman: w3759
This paper uses time series and cross-industry data on employment and wages in Puerto Rico to assess the effects of applying the U.S. minimum wage to the Puerto Rican labor market. We find that the U.S. minimum has a massive effect on the earnings distribution in Puerto Rico and that it has substantially lowered employment and altered the allocation of labor across industries. The reduction in employment is due to the fact that the minimum has a high level relative to average earnings or productivity, not to an especially high estimated elasticity of employment to the minimum. We claim that the results support the textbook model of the minimum wage more strongly than studies of the minimum in the U.S. because in Puerto Rico the U.S. minimum has "real bite."
 
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