Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil

Contents:

Author Info

  • Sara lemos

    ()

Abstract

The minimum wage literature is very limited on empirical evidence for developing countries. This already limited literature is even more limited on the effects of the minimum wage in the informal sector, where most of the poor are. Extending the understanding of minimum wage effects both in developing countries and in particular in the informal sector is crucial if the minimum wage is to be used as a policy to help poor people in poor countries. This paper estimates wage and employment effects, accounting for sorting into the formal and informal sectors. The data used is a monthly Brazilian household survey from 1982 to 2000 at individual and regional levels. The formal and informal sectors employment effects were both found to be negative, consistent with the presence of a large spike, substantial spillover effects, and the associated compression effect in the wage distribution of both sectors. This suggests a downwards sloping labour demand curve in both sectors, challenging the standard Two Sectors Model as inadequate to explain the effect of the minimum wage on the formal and informal sectors in Brazil and in Latin America more generally.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp04-8.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 04/8.

as in new window
Length:
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:lec:leecon:04/8

Contact details of provider:
Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
Phone: +44 (0)116 252 2887
Fax: +44 (0)116 252 2908
Email:
Web page: http://www2.le.ac.uk/departments/economics
More information through EDIRC

Order Information:
Email:
Web: http://www2.le.ac.uk/departments/economics/research/discussion-papers

Related research

Keywords: minimum wage; wage effect; employment effect; informal sector; Brazil;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S87-104, August.
  2. 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.
  3. 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.
  4. Burkhauser, Richard V & Couch, Kenneth A & Wittenburg, David C, 2000. "A Reassessment of the New Economics of the Minimum Wage Literature with Monthly Data from the Current Population Survey," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 653-80, October.
  5. Gonzaga, Gustavo & Camargo, José Márcio & Neri, Marcelo Cortes, 2000. "Distribuição Regional Da Efetividade Do Salário Mínimo No Brasil," Economics Working Papers (Ensaios Economicos da EPGE) 375, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  6. Loayza, Norman A., 1997. "The economics of the informal sector : a simple model and some empirical evidence from Latin America," Policy Research Working Paper Series 1727, The World Bank.
  7. 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, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  8. 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.
  9. Sara lemos, 2004. "Political Variables as Instruments for the Minimum Wage," Discussion Papers in Economics 04/11, Department of Economics, University of Leicester.
  10. William Wascher & David Neumark, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Comment," American Economic Review, American Economic Association, vol. 90(5), pages 1362-1396, December.
  11. Edwards, Sebastian & Edwards, Alejandra Cox, 2002. "Social Security Privatization and Labor Markets: The Case of Chile," Economic Development and Cultural Change, University of Chicago Press, vol. 50(3), pages 465-89, April.
  12. R. Hirschowitz, 1989. "The Other Path: The Invisible Revolution in the Third World," South African Journal of Economics, Economic Society of South Africa, vol. 57(4), pages 266-272, December.
  13. Gabriel Ulyssea & Miguel N. Foguel, 2006. "Efeitos do Salário Mínimo Sobre o Mercado de Trabalho Brasileiro," Discussion Papers 1168, Instituto de Pesquisa Econômica Aplicada - IPEA.
  14. Katherine Terrell & Fatma El Hamidi, 2001. "The Impact of Minimum Wages on Wage Inequality and Employment in the Formal and Informal Sector in Costa Rica," William Davidson Institute Working Papers Series 479, William Davidson Institute at the University of Michigan.
  15. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  16. 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, Cornell University, ILR School, vol. 46(1), pages 55-81, October.
  17. repec:idb:brikps:54718 is not listed on IDEAS
  18. Bell, Linda A, 1997. "The Impact of Minimum Wages in Mexico and Colombia," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S102-35, July.
  19. Janet Currie & Bruce Fallick, 1993. "The Minimum Wage and the Employment of Youth: Evidence from the NLSY," NBER Working Papers 4348, National Bureau of Economic Research, Inc.
  20. Sebastian Edwards & Alejandra Cox Edwards, 2002. "Social Security Privatization Reform and Labor Markets: The Case of Chile," NBER Working Papers 8924, National Bureau of Economic Research, Inc.
  21. Zadia M. Feliciano, 1998. "Does the Minimum Wage Affect Employment in Mexico?," Eastern Economic Journal, Eastern Economic Association, vol. 24(2), pages 165-180, Spring.
  22. 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].
  23. 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.
  24. 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.
  25. Ricardo Paes de Barros & Carlos Henrique Corseuil & Miguel N. Foguel & Philippe G. Leite, 2001. "Uma avaliação dos impactos do salário mínimo sobre o nível de pobreza metropolitana no Brasil," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 2(1), pages 47-71, January-J.
  26. Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," World Bank Economic Review, World Bank Group, vol. 13(2), pages 275-302, May.
  27. 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.
  28. Edward M. Gramlich, 1976. "Impact of Minimum Wages on Other Wages, Employment, and Family Incomes," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(2), pages 409-462.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Basu, Arnab K & Chau, Nancy H & Kanbur, Ravi, 2005. "Turning a Blind Eye: Costly Enforcement, Credible Commitment and Minimum Wage Laws," CEPR Discussion Papers 5107, C.E.P.R. Discussion Papers.
  2. Auerbach, Paula & Genoni, Maria Eugenia & Pagés, Carmen, 2007. "Social Security Coverage and the Labor Market in Developing Countries," IZA Discussion Papers 2979, Institute for the Study of Labor (IZA).
  3. Gindling, T.H. & Terrell, Katherine, 2009. "Minimum wages, wages and employment in various sectors in Honduras," Labour Economics, Elsevier, vol. 16(3), pages 291-303, June.
  4. 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.
  5. Gindling, T.H. & Terrell, Katherine, 2007. "The effects of multiple minimum wages throughout the labor market: The case of Costa Rica," Labour Economics, Elsevier, vol. 14(3), pages 485-511, June.
  6. Basu, Arnab K. & Chau, Nancy & Kanbur, Ravi, 2011. "Contractual Dualism, Market Power and Informality," IZA Discussion Papers 5845, Institute for the Study of Labor (IZA).
  7. Basu, Arnab K. & Chau, Nancy & Siddique, Zahra, 2011. "Tax Evasion, Minimum Wage Non-Compliance and Informality," IZA Discussion Papers 6228, Institute for the Study of Labor (IZA).
  8. Eugenia Fotoniata & Thomas Moutos, 2011. "Product Quality, Informality, and Child Labour," CESifo Working Paper Series 3537, CESifo Group Munich.
  9. Arslan Razmi, 2006. "Aspects of Informalization and Income Distribution in Developing Countries: A Modified Specific Factors Approach," UMASS Amherst Economics Working Papers 2006-03, University of Massachusetts Amherst, Department of Economics.
  10. Gindling, T. H. & Mossaad, Nadwa & Trejos, Juan Diego, 2014. "The Consequences of Increased Enforcement of Legal Minimum Wages in a Developing Country: An Evaluation of the Impact of the Campaña Nacional de Salarios Mínimos in Costa Rica," IZA Discussion Papers 8253, Institute for the Study of Labor (IZA).
  11. Paula Auerbach & María Eugenia Genoni & Carmen Pagés-Serra, 2005. "Cobertura del sistema de seguridad social y el mercado laboral en países en desarrollo," Research Department Publications 4422, Inter-American Development Bank, Research Department.
  12. Betcherman, Gordon, 2014. "Labor market regulations : what do we know about their impacts in developing countries ?," Policy Research Working Paper Series 6819, The World Bank.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:lec:leecon:04/8. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mrs. Alexandra Mazzuoccolo).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.