Impact of Minimum Wage and Government Ideology on Unemployment Rates: The Case of Post-Communist Romania

International Journal of Humanities and Social Science, Vol. 2, No. 1, 2012

10 Pages Posted: 21 Nov 2012

See all articles by Bogdan Bonca

Bogdan Bonca

George Washington University - Department of Economics

Date Written: January 10, 2012

Abstract

The present paper fills a gap in economic literature by analyzing the relationship between unemployment rates and minimum wage levels in Romania between 1994-2007. The hypothesis tested is that this relationship is nonlinear, with government ideology playing an integral part in determining the unemployment rate through an interaction term. The method of analysis is a time series regression tested with a two-period lag used to eliminate possible endogeneity. Finally, the model is tested for robustness using a 2-lag VAR and a first difference regression. The results appear robust and the evidence seems to point towards a statistically significant non-linear relationship between unemployment and minimum wages. Finally, additional limitations and avenues for expanding the model are suggested.

Keywords: unemployment, political ideology, labor markets, time series, political economy, Romania

JEL Classification: C22, E24, E69, J68, P16

Suggested Citation

Bonca, Bogdan, Impact of Minimum Wage and Government Ideology on Unemployment Rates: The Case of Post-Communist Romania (January 10, 2012). International Journal of Humanities and Social Science, Vol. 2, No. 1, 2012, Available at SSRN: https://ssrn.com/abstract=2178809

Bogdan Bonca (Contact Author)

George Washington University - Department of Economics ( email )

Monroe Hall, Suite 340
2115 G Street, NW
Washington, DC 20052
United States

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