A Cohort Based Analysis of the Influence of Minimum Wage Levels on Labor Force Participation in the Informal Sector: Quantitative and Substitution Effects

This paper discusses the effect of the minimum wage level on the decision to join the informal job sector. We estimate a pseudo panel of the engagement in the informal sector using an IV-probit. The findings show that an increase in the minimum wage level leads to a substitution effect between young and older workers. This result show that the standards effects over the labor market in the WGM segmented model are moderate because an increase of the minimum wage level does not imply total mobility between sectors.

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