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Anticipated effects of the minimum wage on prices

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  • Sara Lemos

Abstract

There is little empirical evidence on the effect of minimum wage increases on prices, particularly for developing countries. This paper provides estimates of this effect using monthly Brazilian household and firm data over 18 years. As minimum wage increases in Brazil sare large and frequent, they have a potentially important impact on aggregate prices. Rational agents, in anticipation of such price effects, may take minimum wage increases as a signal for future price and wage bargains. We find that the minimum wage raises overall prices not only on the month of the increase, but also in the two months prior to the change as well as after the change.

Suggested Citation

  • Sara Lemos, 2006. "Anticipated effects of the minimum wage on prices," Applied Economics, Taylor & Francis Journals, vol. 38(3), pages 325-337.
  • Handle: RePEc:taf:applec:v:38:y:2006:i:3:p:325-337
    DOI: 10.1080/00036840500368722
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    References listed on IDEAS

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    8. Sara Lemos, 2004. "Minimum Wage Policy and Employment Effects: Evidence from Brazil," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Fall 2004), pages 219-266, August.
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    10. 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, March.
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    Cited by:

    1. Ernesto Sheriff, 2010. "Inflationary memory as restrictive factor of the impact of the public expense in the economic growth: lessons from high inflation Latin American countries using an innovative inflationary memory indic," Development Research Working Paper Series 13/2010, Institute for Advanced Development Studies.
    2. Belser, Patrick. & Rani, Uma., 2010. "Extending the coverage of minimum wages in India : simulations from household data," ILO Working Papers 994584553402676, International Labour Organization.
    3. Luis Eduardo Arango & Luz Karine Ardila & Miguel Igancio Gómez, 2010. "Efecto del cambio del salario mínimo en el precio de las comidas fuera del hogar en Colombia," BORRADORES DE ECONOMIA 006621, BANCO DE LA REPÚBLICA.
    4. Juli?n Messina & Anna Sanz-de-Galdeano, 2014. "Wage Rigidity and Disinflation in Emerging Countries," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(1), pages 102-133, January.
    5. Thomas Werner & Friedrich L. Sell, 2015. "Price Effects of the Minimum Wage: A Survey Data Analysis for the German Construction Sector," LABOUR, CEIS, vol. 29(3), pages 310-326, September.
    6. Roberta Gatti & Diego F. Angel-Urdinola & Joana Silva & Andras Bodor, 2014. "Striving for Better Jobs : The Challenge of Informality in the Middle East and North Africa," World Bank Publications, The World Bank, number 19905.
    7. Werner, Thomas & Sell, Friedrich L. & Reinisch, David C., 2013. "Price effects of minimum wages: Evidence from the construction sector in East and West Germany," Working Papers in Economics 2013,4, Bundeswehr University Munich, Economic Research Group.
    8. Hoxha Adriatik, 2010. "Causal relationship between prices and wages: VECM analysis for Germany," EuroEconomica, Danubius University of Galati, issue 26, pages 90-106, November.
    9. 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.
    10. Gligor Bishev & Tatjana Boshkov, 2015. "Arguments for and Against Retaining Exchange Rate Regime: An Empirical Analysis for Republic of Macedonia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(8), pages 1004-1013, August.

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    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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