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The contribution of minimum wage valorization policy to the decline in household income inequality in Brazil: A decomposition approach

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  • Alessandra Brito
  • Miguel Foguel
  • Celia Kerstenetzky

Abstract

There is a vast literature that estimates the effect of the minimum wage on wage inequality in various countries. However, as the minimum wage directly affects nonlabor income of families in some countries (in the Brazilian case via the benefits of the pension system and of certain social programs), this article extends the empirical analysis by studying the effects of the minimum wage on the level of inequality of household income as a whole. To accomplish that we employ a decomposition method that gauges the contribution of the increases in the minimum wage that occurred in recent decades in Brazil through the labor and nonlabor sources of household income. The results show that the minimum wage had a contribution of 64 percent to the observed fall in income inequality between 1995 and 2014 and that pensions were the most relevant channel over this period.

Suggested Citation

  • Alessandra Brito & Miguel Foguel & Celia Kerstenetzky, 2017. "The contribution of minimum wage valorization policy to the decline in household income inequality in Brazil: A decomposition approach," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 40(4), pages 540-575, October.
    • Handle: RePEc:mes:postke:v:40:y:2017:i:4:p:540-575
    DOI: 10.1080/01603477.2017.1333436
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    2. Diogo Ferraz & Enzo B. Mariano & Daisy Rebelatto & Dominik Hartmann, 2020. "Linking Human Development and the Financial Responsibility of Regions: Combined Index Proposals Using Methods from Data Envelopment Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 150(2), pages 439-478, July.
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    4. Vanesa Jorda & Jose M. Alonso, 2020. "What works to mitigate and reduce relative (and absolute) inequality?: A systematic review," WIDER Working Paper Series wp-2020-152, World Institute for Development Economic Research (UNU-WIDER).

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