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Political Variables as Instruments for the Minimum Wage

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  • Sara lemos

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Abstract

Following the early 1980s apparent consensus, there has been a controversial debate in the literature over the direction of the minimum wage employment effect. Explanations to non-negative effects range from theoretical to empirical identification and data issues. An explanation, however, that has not been sufficiently explored is that a non-negative effect might be an upward biased estimate of a truly negative effect, resulting from the simultaneous determination of the minimum wage and employment. This paper estimates the employment effect of the minimum wage using a number of political variables – not previously used in the literature – as excluded exogenous instruments to control for the endogeneity of the minimum wage variable. The data used is an under-explored Brazilian monthly household survey from 1982 to 2000. Robust results indicate that an increase in the minimum wage has very small adverse effects on employment.

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Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 04/11.

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Date of creation: Apr 2004
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Handle: RePEc:lec:leecon:04/11

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Keywords: minimum wage; wage effect; employment effect; instruments; political variables; Brazil;

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Citations

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Cited by:
  1. Sara lemos, 2004. "The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil," Discussion Papers in Economics, Department of Economics, University of Leicester 04/8, Department of Economics, University of Leicester.
  2. Sara Lemos, 2004. "The Effect of the Minimum Wage on Prices in Brazil," Discussion Papers in Economics, Department of Economics, University of Leicester 04/6, Department of Economics, University of Leicester.
  3. Sara Lemos, 2006. "Minimum Wage Effects in a Developing Country," Discussion Papers in Economics, Department of Economics, University of Leicester 06/1, Department of Economics, University of Leicester.
  4. Fernando Borraz & Nicolás Gonzalez Pampillón, 2011. "Assessing the Distributive Impact of More than Doubling the Minimum Wage: The Case of Uruguay," Documentos de Trabajo (working papers), Department of Economics - dECON 1711, Department of Economics - dECON.
  5. Lemos, Sara, 2004. "The Effects of the Minimum Wage on Wages, Employment and Prices," IZA Discussion Papers 1135, Institute for the Study of Labor (IZA).
  6. Sen, Anindya & Rybczynski, Kathleen & Van De Waal, Corey, 2011. "Teen employment, poverty, and the minimum wage: Evidence from Canada," Labour Economics, Elsevier, Elsevier, vol. 18(1), pages 36-47, January.
  7. Sara Lemos, 2004. "A Menu Of Minimum Wage Variables For Evaluating Wages and Employment Effects: Evidence From Brazil," Labor and Demography, EconWPA 0403009, EconWPA.
  8. David Neumark & William Wascher, 2006. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," Working Papers 060708, University of California-Irvine, Department of Economics, revised Jan 2007.
  9. Hanna Frings, 2013. "The Employment Effect of Industry-Specific, Collectively Bargained Minimum Wages," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 14(3), pages 258-281, 08.
  10. Jellal, Mohamed, 2012. "Maroc salaire minimum emploi et pauvreté
    [Morocco minimum wage employment and poverty]
    ," MPRA Paper 38491, University Library of Munich, Germany.

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