Abstract:
We present minimum wage effects across different enforcement regimes. Exploiting state-time variation and policy discontinuities at contiguous districts across state borders in India, we show that the effect of minimum wages on wages and employment significantly increases with an increase in enforcement. In weak enforcement regimes, estimated wage effects are negligible and employment effects are negative or null. In stricter regimes, wage effects are positive and strong, and employment effects are positive or null. These results are consistent with theories on imperfect enforcement in monopsonistic labor markets, and are robust to alternative definitions of enforcement and employment, and employing instrumental variables for enforcement.

Bio:
Vidhya Soundararajan is an Assistant Professor in the Indian Institute of Management Bangalore. Her research lies at the intersection of labour and development economics, particularly on the impact of labour market institutions and regulations on employment, wages, and productivity in low-wage labour markets. She employs econometric methods focussing on causal estimations and uses observational data at the firm or household level. Another thread in her research uses machine learning methods for predicting welfare indicators in small areas, which is immensely useful for public program delivery. Vidhya received her PhD in Applied Economics from Cornell University, a masters in economics from Madras school of economics, and a bachelor’s degree in engineering from Madras Institute of Technology. Prior to her PhD, she worked at various policy organizations such as the World Bank, the International Food Policy Research Institute, and the Planning Commission of India, where her work centred on understanding agricultural value chains and evaluating rural development programs in India. She is the recipient of the George Warren Award from Cornell dyson school for outstanding manuscript; the Cornell graduate fellowship, and Merit-fellowship at Madras School of Economics.