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Political Variables as Instruments for the Minimum Wage

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Author Info
Sara Lemos

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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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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
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Handle: RePEc:wpa:wuwpla:0403010

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

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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.:
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    Other versions:
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  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!]
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    Other versions:
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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. Sara Lemos, 2005. "How Do Alternative Minimum Wage Variables Compare?," Discussion Papers in Economics 05/6, Department of Economics, University of Leicester. [Downloadable!]
  2. Sara Lemos, 2004. "The Effects of the Minimum Wage on Prices in Brazil," Labor and Demography 0403011, EconWPA. [Downloadable!]
    Other versions:
  3. Sara Lemos, 2006. "Minimum Wage Effects in a Developing Country," Discussion Papers in Economics 06/1, Department of Economics, University of Leicester. [Downloadable!]
    Other versions:
  4. 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:
  5. 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:
  6. 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:
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