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Political Variables as Instruments for the Minimum Wage

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  • Sara Lemos

Abstract

The international literature on minimum wage greatly lacks empirical evidence from developing countries. In Brazil, not only are increases in the minimum wage large and frequent but also the minimum wage has been used as anti-inflation policy in addition to its social role. This paper estimates the effects of the minimum wage on employment using monthly household data from 1982 to 2000 aggregated at regional level. A number of conceptual and identification questions is discussed as tentative explanation of the non-negative estimates found in the literature, for example: (1) The use of political variables as excluded exogenous instruments for the minimum wage variable; (2) The superiority of “spike” over “fraction affected” and “Kaitz index” as a minimum wage variable; (3) The decomposition of the minimum wage employment effect into hours worked and number of jobs effects; (4) Robustness checks accounting for sorting into informal and public sectors. Robust results to various alternative specifications and instrumental variables indicate that an increase in the minimum wage has moderately small adverse effects on employment.

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Bibliographic Info

Paper provided by EconWPA in its series Labor and Demography with number 0403010.

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Length: 30 pages
Date of creation: 04 Mar 2004
Date of revision:
Handle: RePEc:wpa:wuwpla:0403010

Note: Type of Document - pdf; prepared on win98; pages: 30
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Web page: http://128.118.178.162

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

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Citations

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Cited by:
  1. Sen, Anindya & Rybczynski, Kathleen & Van De Waal, Corey, 2011. "Teen employment, poverty, and the minimum wage: Evidence from Canada," Labour Economics, Elsevier, vol. 18(1), pages 36-47, January.
  2. Sara lemos, 2004. "The Effects of the Minimum Wage on Wages, Employment and Prices," Discussion Papers in Economics 04/10, Department of Economics, University of Leicester.
  3. Jellal, Mohamed, 2012. "Maroc salaire minimum emploi et pauvreté
    [Morocco minimum wage employment and poverty]
    ," MPRA Paper 38491, University Library of Munich, Germany.
  4. Sara Lemos, 2004. "A Menu of Minimum Wage Variables for Evaluating Wages and Employment Effects: Evidence from Brazil," Discussion Papers in Economics 04/3, Department of Economics, University of Leicester.
  5. Sara Lemos, 2004. "The Effect of the Minimum Wage on Prices in Brazil," Discussion Papers in Economics 04/6, Department of Economics, University of Leicester.
  6. Hanna Frings, 2012. "The Employment Effect of Industry-Specific, Collectively-Bargained Minimum Wages," Ruhr Economic Papers 0348, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  7. 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.
  8. 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.
  9. Sara Lemos, 2006. "Minimum Wage Effects in a Developing Country," Discussion Papers in Economics 06/1, Department of Economics, University of Leicester.
  10. 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) 1711, Department of Economics - dECON.

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