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α: calibrated so average coauthorship-adjusted count equals average raw count
In many developing countries there is a substantial difference between de jure and de facto regulation of minimum wages. We examine the consequences of this by looking at the heterogenous effects of minimum wages across compliance regimes in India. We show that minimum wages have a positive effect on wages, without a corresponding effect on employment. As a result, household consumption increases following increases in the minimum wage. However, the beneficial pass-through to wages and consumption is significantly reduced in low compliance regimes. Labour market reforms can improve workers’ living standards but only if accompanied by effective compliance.