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Political Variables as Instruments for the Minimum Wage

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  • Sara lemos

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Abstract

Following the early 1980s apparent consensus, there has been a controversial debate in the literature over the direction of the minimum wage employment effect. Explanations to non-negative effects range from theoretical to empirical identification and data issues. An explanation, however, that has not been sufficiently explored is that a non-negative effect might be an upward biased estimate of a truly negative effect, resulting from the simultaneous determination of the minimum wage and employment. This paper estimates the employment effect of the minimum wage using a number of political variables – not previously used in the literature – as excluded exogenous instruments to control for the endogeneity of the minimum wage variable. The data used is an under-explored Brazilian monthly household survey from 1982 to 2000. Robust results indicate that an increase in the minimum wage has very small adverse effects on employment.

Suggested Citation

  • Sara lemos, 2004. "Political Variables as Instruments for the Minimum Wage," Discussion Papers in Economics 04/11, Department of Economics, University of Leicester.
  • Handle: RePEc:lec:leecon:04/11
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. David Neumark & William Wascher, 2006. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," NBER Working Papers 12663, National Bureau of Economic Research, Inc.
    2. repec:zbw:rwirep:0348 is not listed on IDEAS
    3. Hanna Frings, 2013. "The Employment Effect of Industry-Specific, Collectively Bargained Minimum Wages," German Economic Review, Verein für Socialpolitik, vol. 14(3), pages 258-281, August.
    4. Sara Lemos, 2004. "The Effects of the Minimum Wage on Prices in Brazil," Labor and Demography 0403011, EconWPA.
    5. Lemos, Sara, 2009. "Minimum wage effects in a developing country," Labour Economics, Elsevier, vol. 16(2), pages 224-237, April.
    6. 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.
    7. 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.
    8. 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.
    9. 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).
    10. repec:bla:coecpo:v:36:y:2018:i:1:p:116-135 is not listed on IDEAS
    11. 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.
    12. repec:bla:rdevec:v:21:y:2017:i:4:p:1081-1112 is not listed on IDEAS
    13. Fernando Borraz & Nicolás González-Pampillón, 2017. "Assessing the distributive effects of minimum wage," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 1081-1112, November.
    14. 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.
    15. Jellal, Mohamed, 2012. "Maroc salaire minimum emploi et pauvreté
      [Morocco minimum wage employment and poverty]
      ," MPRA Paper 38491, University Library of Munich, Germany.
    16. Christl, Michael & Köppl Turyna, Monika & Kucsera, Denes, 2015. "Employment effects of minimum wages in Europe revisited," MPRA Paper 65761, University Library of Munich, Germany.

    More about this item

    Keywords

    minimum wage; wage effect; employment effect; instruments; political variables; Brazil;

    JEL classification:

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

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