IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Effects of the Minimum Wage on Prices in Brazil

  • Sara Lemos

There is very little evidence on the effects of the minimum wage on prices in the international literature and none whatsoever for developing countries. This paper analyzes the effects of the minimum wage on prices using monthly Brazilian household and price data from 1982 to 2000 aggregated at a regional level. A number of conceptual and identification questions are discussed, for example: (1) Empirical evidence on price effects might help to answer the question of who pays for the higher costs: firms, consumers, or unemployed. The answer to this question is important for the controversial recent minimum wage debate. Employment might not be affected if firms are able to pass through to prices the higher labour costs associated to a minimum wage increase. (2) If the poor are the consumers of minimum wage labour intensive goods, or if these goods represent a large proportion of their consumption bundle, then minimum wage increases might hurt rather than aid the poor. Furthermore, if minimum wage increases are passed on to consumer prices causing inflation, they might again hurt the poor, who disproportionately suffer from inflation. This is particularly so in the presence of hyperinflation; even more so if the minimum wage has been used as anti-inflation policy in addition to its social role, as in Brazil. Robustness checks on the price effects at a regional level, on low and high income consumers and under low inflation are performed. Robust results indicate that minimum wage increases raise overall prices in Brazil. The resulting inflation is the same for the poor and the rich, smaller in low inflation periods, and larger in poorer regions.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://econwpa.repec.org/eps/lab/papers/0403/0403011.pdf
Download Restriction: no

Paper provided by EconWPA in its series Labor and Demography with number 0403011.

as
in new window

Length: 25 pages
Date of creation: 04 Mar 2004
Date of revision:
Handle: RePEc:wpa:wuwpla:0403011
Note: Type of Document - pdf; prepared on win98; pages: 25
Contact details of provider: Web page: http://econwpa.repec.org

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.:

as in new window
  1. 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.
  2. Lemos, Sara, 2004. "Political Variables as Instruments for the Minimum Wage," IZA Discussion Papers 1136, Institute for the Study of Labor (IZA).
  3. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," ILR Review, Cornell University, ILR School, vol. 46(1), pages 22-37, October.
  4. Laurence Ball & N. Gregory Mankiw & David Romer, 1988. "The New Keynsesian Economics and the Output-Inflation Trade-off," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 1-82.
  5. Gron, Anne & Swenson, Deborah L, 1996. "Incomplete Exchange-Rate Pass-Through and Imperfect Competition: The Effect of Local Production," American Economic Review, American Economic Association, vol. 86(2), pages 71-76, May.
  6. 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.
  7. Sheshinski, Eytan & Weiss, Yoram, 1977. "Inflation and Costs of Price Adjustment," Review of Economic Studies, Wiley Blackwell, vol. 44(2), pages 287-303, June.
  8. Marvin Goodfriend & Robert King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296 National Bureau of Economic Research, Inc.
  9. 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.
  10. Neumark, David & Wascher, William, 1995. "Minimum Wage Effects on Employment and School Enrollment," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 199-206, April.
  11. 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.
  12. 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.
  13. Besley, Timothy J. & Rosen, Harvey S., 1999. "Sales Taxes and Prices: An Empirical Analysis," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 157-78, June.
  14. Daniel Aaronson & Eric French, 2007. "Product Market Evidence on the Employment Effects of the Minimum Wage," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 167-200.
  15. Katz, L.F. & Krueger, A.B., 1992. "The Effect of the Minimum Wage on the Fast Food Industry," Harvard Institute of Economic Research Working Papers 1584, Harvard - Institute of Economic Research.
  16. Cecchetti, Stephen G., 1986. "The frequency of price adjustment : A study of the newsstand prices of magazines," Journal of Econometrics, Elsevier, vol. 31(3), pages 255-274, April.
  17. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  18. Pinelopi K. Goldberg & Michael M. Knetter, 1996. "Goods Prices and Exchange Rates: What Have We Learned?," NBER Working Papers 5862, National Bureau of Economic Research, Inc.
  19. Kotlikoff, Laurence J. & Summers, Lawrence H., 1987. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 16, pages 1043-1092 Elsevier.
  20. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-49, May.
  21. Knetter, Michael M, 1989. "Price Discrimination by U.S. and German Exporters," American Economic Review, American Economic Association, vol. 79(1), pages 198-210, March.
  22. 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.
  23. Layard, P. R. G. & Nickell, S. J., 1985. "Unemployment, real wages, and aggregate demand in Europe, Japan and the United States," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 23(1), pages 143-202, January.
  24. Galí, Jordi & Gertler, Mark & López-Salido, J David, 2001. "European Inflation Dynamics," CEPR Discussion Papers 2684, C.E.P.R. Discussion Papers.
  25. Jaewoo Lee, 1997. "The Response Of Exchange Rate Pass-Through To Market Concentration In A Small Economy: The Evidence From Korea," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 142-145, February.
  26. Daniel Aaronson, 2001. "Price Pass-Through And The Minimum Wage," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 158-169, February.
  27. Robert J. Gordon, 1981. "Inflation, Flexible Exchange Rates, and the Natural Rate of Unemployment," NBER Working Papers 0708, National Bureau of Economic Research, Inc.
  28. James M. MacDonald & Daniel Aaronson, 2000. "How do retail prices react to minimum wage increases?," Working Paper Series WP-00-20, Federal Reserve Bank of Chicago.
  29. Richard V. Burkhauser & T. Aldrich Finegan, 1989. "The minimum wage and the poor: The end of a relationship," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(1), pages 53-71.
  30. Stephen Machin & Alan Manning & Lupin Rahman, 2002. "Where the Minimum Wage Bites Hard: the Introduction of the UK National Minimum Wage to a Low Wage Sector," CEP Discussion Papers dp0544, Centre for Economic Performance, LSE.
  31. Daniel S. Hamermesh, 2002. "International Labor Economics," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 709-732, October.
  32. David Neumark & William Wascher, 1995. "The Effects of Minimum Wages on Teenage Employment and Enrollment: Evidence from Matched CPS Surveys," NBER Working Papers 5092, National Bureau of Economic Research, Inc.
  33. Weiss, Y., 1992. "Inflation and price Adjustment : A Susvey of Findings from Micro-Data," Papers 3-92, Tel Aviv - the Sackler Institute of Economic Studies.
  34. Jon Frye & Robert J. Gordon, 1980. "Government Intervention in the Inflation Process: The Econometrics of "Self-Inflicted Wounds"," NBER Working Papers 0550, National Bureau of Economic Research, Inc.
  35. Robert E. Hall, 1974. "The Process of Inflation in the Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 5(2), pages 343-410.
  36. Robert Valletta, 1996. "The minimum wage," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue oct11.
  37. Poterba, James M., 1996. "Retail Price Reactions to Changes in State and Local Sales Taxes," National Tax Journal, National Tax Association, vol. 49(2), pages 165-76, June.
  38. 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.
  39. Lee, Chinkook & O'Roark, Brian, 1999. "The Impact of Minimum Wage Increases on Food and Kindred Product Prices: An Analysis of Price Pass-Through," Technical Bulletins 184373, United States Department of Agriculture, Economic Research Service.
  40. 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.
  41. Jean Baldwin Grossman, 1983. "The Impact of the Minimum Wage on Other Wages," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 359-378.
  42. 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).
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpla:0403011. 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: (EconWPA)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.