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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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Find related papers by JEL classification:
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lemos, Sara, 2004. "The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil," IZA Discussion Papers 1089, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. 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). [Downloadable!]
    Other versions:
  3. Sara Lemos, 2005. "How Do Alternative Minimum Wage Variables Compare?," Discussion Papers in Economics 05/6, Department of Economics, University of Leicester. [Downloadable!]
  4. Sara Lemos, 2004. "A Menu Of Minimum Wage Variables For Evaluating Wages and Employment Effects: Evidence From Brazil," Labor and Demography 0403009, EconWPA. [Downloadable!]
    Other versions:
  5. Sara Lemos, 2004. "The Effects of the Minimum Wage on Prices in Brazil," Labor and Demography 0403011, EconWPA. [Downloadable!]
    Other versions:
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