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The Effects of the Minimum Wage in the Private and Public Sectors in Brazil

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  • Sara lemos

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Abstract

The wage and employment effects of the minimum wage predicted by the standard neoclassical theory rely on a profit maximizing firm, not on a Government employer that can cover the higher wage bill by raising taxes, reducing expenditure, or simply printing money. If the public sector has an inelastic labour demand, the associated non-negative employment effect might offset some of the negative employment effect observed in the private sector and the overall employment effect might be less adverse. This is particularly so if the public sector is overpopulated by minimum wage workers, as in Brazil. There is very limited evidence on the minimum wage effects in developing countries, and none whatsoever on the minimum wage effects across the private and public sectors. This paper estimates the effects of the minimum wage on wages and employment in both the private and public sectors. The data used is an under-explored monthly Brazilian household survey from 1982 to 2000 at individual and regional levels. Robust results suggest that the minimum wage compresses the distribution of both sectors, but in line with a stronger effect in the private sector, more adverse employment effects in the long run are also observed in that sector. In the public sector, no evidence of adverse employment effects was uncovered.

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Bibliographic Info

Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 04/12.

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Date of creation: Apr 2004
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Handle: RePEc:lec:leecon:04/12

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Keywords: minimum wage; wage effect; employment effect; private sector; public sector; Brazil;

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Cited by:
  1. Sara lemos, 2004. "Political Variables as Instruments for the Minimum Wage," Discussion Papers in Economics 04/11, Department of Economics, University of Leicester.
  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).
  3. David Neumark & William Wascher, 2006. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," NBER Working Papers 12663, National Bureau of Economic Research, Inc.

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