Minimum Wage and Ethnic-Gaps: Who are the Winners?

This paper attempts to answer whether minimum wage increases help to close ethnic-gap in Peru. To answer this question, I study the period 2004–2019 and estimate the effects of minimum wage increases based on nominal minimum wage, real minimum wage, and Kaitz index terms. Also, I use several econometric strategies, but mainly I rely the results on IV-OLS and IV-Probit. I find that the minimum wage has generally benefited Whites, Mestizos, and Andeans, but especially the latter, which has boosted the closing of ethnic-gap. Minimum Wage increases has benefited mainly the Andean people in the lowest income bracket, that is, on the most vulnerable population or dependent on changes in the minimum wage. However, I find also that the minimum wage also has benefited another specific group, the high-skilled mestizos, which indicates that while the gap is reduced on the lower side, it opens on the higher side. Finally, when I analyze the probability of being employed, having informal employment, and having stable employment, I find small and non-significant impacts in most of the estimates.