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Working paper

Влияние минимальной заработной платы на неформальную занятость

In this paper, we study the infl uence of the state-regulated minimum wage on informal employment in Russia. In order to estimate minimum wage effects we apply a methodology originally presented by D. Newmark and W. Washer (Neumark and Wascher (1992) “Employment Effects of Minimum Wages and Subminimum Wages: Panel Data on State Minimum Wage Laws”) on quarterly regional panel data from 2001 to 2010. Our main robust fi nding is that minimum wage hikes increase both the share of informal employment (% of total employment) and the level of informal employment (% of population), while the level of formal employment is reduced. These effects occur within 2–4 months after raising the minimum wage, and are most apparent in the period from 2007 to 2010, when there were two strong increases of the federal minimum wage, and the regions were able to set their own minimum wage above the federal level.