The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil
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.
|Date of creation:||Mar 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (0)116 252 2887
Fax: +44 (0)116 252 2908
Web page: http://www2.le.ac.uk/departments/economics
More information through EDIRC
|Order Information:|| Web: http://www2.le.ac.uk/departments/economics/research/discussion-papers Email: |
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.:
- Janet Currie & Bruce C. Fallick, 1996.
"The Minimum Wage and the Employment of Youth Evidence from the NLSY,"
Journal of Human Resources,
University of Wisconsin Press, vol. 31(2), pages 404-428.
- 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.
- 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.
- 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.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- 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.
- David Neumark & William Wascher, 1992.
"Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws,"
Cornell University, ILR School, vol. 46(1), pages 55-81, October.
- 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.
- 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.
- Sara Lemos, 2004.
"Political Variables as Instruments for the Minimum Wage,"
Labor and Demography
- Lemos Sara, 2005. "Political Variables as Instruments for the Minimum Wage," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-33, December.
- Sara lemos, 2004. "Political Variables as Instruments for the Minimum Wage," Discussion Papers in Economics 04/11, Department of Economics, University of Leicester.
- Sara Lemos, 2003. "Political Variables as Instruments for the Minimum Wage," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31th Brazilian Economics Meeting] f08, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
- Lemos, Sara, 2004. "Political Variables as Instruments for the Minimum Wage," IZA Discussion Papers 1136, Institute for the Study of Labor (IZA).
- 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.
- 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.
- 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).
- Marcelo Neri & Gustavo Gonzaga & José Márcio Camargo, 1999. "Distribuição regional da efetividade do salário mínimo no Brasil," Textos para discussão 397, Department of Economics PUC-Rio (Brazil).
- 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.
- 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.
- Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 129-162, December.
- 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].
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S87-104, August.
- 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.
- 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.
- 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.
- 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.
- Richard Dickens & Stephen Machin & Alan Manning, 1994. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," CEP Discussion Papers dp0183, Centre for Economic Performance, LSE.
- 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.
- 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.
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 references are entirely missing, you can add them using this form.