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Are Wage and Employment Effects Robust to Alternative Minimum Wage Variables?

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Author Info
Sara Lemos ()

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Abstract

A national minimum wage cannot explain variation in wages or employment across regions. Identification of the effect of the minimum wage separately from the effect of other variables on wages or employment requires regional variation. Many minimum wage variables with regional variation have been suggested in the literature. Such a variety of variables makes it difficult to compare estimates across studies. First, estimates using different minimum wage variables are not always calibrated to represent the effect of a 10% increase in the minimum wage on wages or employment. Second, different minimum wage variables might simply measure the effect of the minimum wage on different workers. Part of the controversial recent debate in the literature over the magnitude and direction of the employment effect might be that non-directly comparable estimates are being compared. This paper estimates and critically compares the effects of the minimum wage on both wages and employment using five minimum wage variables common in the literature: real minimum wage, “Kaitz index”, “fraction affected”, “fraction at” and “fraction below” the minimum wage. The data used is a Brazilian monthly household survey from 1982 to 2000. The estimates are robust and indicate that an increase in the minimum wage compresses the wages distribution with 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 04/4.

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Date of creation: Feb 2004
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Handle: RePEc:lec:leecon:04/4

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Keywords: minimum wage; wage effect; employment effect; 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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References listed on IDEAS
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. Meyer, Robert H & Wise, David A, 1983. "Discontinuous Distributions and Missing Persons: The Minimum Wage and Unemployed Youth," Econometrica, Econometric Society, vol. 51(6), pages 1677-98, November. [Downloadable!] (restricted)
    Other versions:
  2. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June. [Downloadable!] (restricted)
  3. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  4. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November. [Downloadable!] (restricted)
  5. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-49, May. [Downloadable!] (restricted)
  6. Richard B. Freeman, 1982. "Economic Determinants of Geographic and Individual Variation in the Labor Market Position of Young Persons," NBER Chapters, in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 115-154 National Bureau of Economic Research, Inc. [Downloadable!]
  7. Pablo Fajnzylber, 2001. "Minimum Wage Effects Throughout the Wage Distribution: Evidence from Brazil's Formal and Informal Sectors," Anais do XXIX Encontro Nacional de Economia [Proceedings of the 29th Brazilian Economics Meeting] 098, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
  8. David Neumark & William Wascher, 1992. "Employment effects of minimum and subminimum wages: Panel data on state minimum wage laws," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 46(1), pages 55-81, October.
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  10. Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163 Elsevier. [Downloadable!] (restricted)
  11. Dickens, Richard & Machin, Stephen & Manning, Alan, 1999. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 1-22, January. [Downloadable!] (restricted)
    Other versions:
  12. Sara Lemos, 2004. "The Effects of the Minimum Wage on Prices in Brazil," Labor and Demography 0403011, EconWPA. [Downloadable!]
    Other versions:
  13. Welch, Finis R & Cunningham, James, 1978. "Effects of Minimum Wages on the Level and Age Composition of Youth Employment," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 140-45, February. [Downloadable!] (restricted)
  14. Baker, Michael & Benjamin, Dwayne & Stanger, Shuchita, 1999. "The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 318-50, April. [Downloadable!] (restricted)
  15. Stephen Machin & Alan Manning, 1994. "The effects of minimum wages on wage dispersion and employment: Evidence from the U.K. Wages Councils," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 47(2), pages 319-329, January.
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  17. Stephen Machin & Alan Manning & Lupin Rahman, 2003. "Where the Minimum Wage Bites Hard: Introduction of Minimum Wages to a Low Wage Sector," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 154-180, 03. [Downloadable!] (restricted)
  18. Williams, Nicolas, 1993. "Regional Effects of the Minimum Wage on Teenage Employment," Applied Economics, Taylor and Francis Journals, vol. 25(12), pages 1517-28, December.
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  20. David Card & Alan B. Krueger, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply," American Economic Review, American Economic Association, vol. 90(5), pages 1397-1420, December. [Downloadable!] (restricted)
  21. Thomas R. Michl, 2000. "Can Rescheduling Explain the New Jersey Minimum Wage Studies?," Eastern Economic Journal, Eastern Economic Association, vol. 26(3), pages 265-276, Summer. [Downloadable!]
  22. José Márcio Camargo, 1984. "Minimum wage in Brazil theory, policy and empirical evidence," Textos para discussão 67, Department of Economics PUC-Rio (Brazil). [Downloadable!]
Full references

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. "Political Variables as Instruments for the Minimum Wage," IZA Discussion Papers 1136, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Sara lemos, 2004. "The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil," Discussion Papers in Economics 04/8, Department of Economics, University of Leicester. [Downloadable!]
    Other versions:
  3. Sara Lemos, 2004. "Minimum Wage Effects Across The Private And Public Sectors In Brazil," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] 155, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
    Other versions:
  4. Melanie K. Jones & Richard J. Jones & Philip D. Murphy & Peter J. Sloane, 2007. "A Persistence Model of the National Minimum Wage," IZA Discussion Papers 2595, Institute for the Study of Labor (IZA). [Downloadable!]
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