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Earnings Inequality and the Minimum Wage: Evidence from Brazil

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  • Niklas Engbom
  • Christian Moser

Abstract

We show that a rise in the minimum wage accounts for a large decline in earnings inequality in Brazil since 1994. To this end, we combine rich administrative and survey data with an equilibrium model of the Brazilian labor market. Our results imply that the minimum wage has far-reaching spillover effects on wages higher up in the distribution, accounting for one-third of the 25.9 log point fall in the variance of log earnings in Brazil since 1994. At the same time, the minimum wage’s effects on employment and output are muted by reallocation of workers toward more productive firms.

Suggested Citation

  • Niklas Engbom & Christian Moser, 2021. "Earnings Inequality and the Minimum Wage: Evidence from Brazil," NBER Working Papers 28831, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:28831
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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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