IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp1069.html
   My bibliography  Save this paper

A Menu of Minimum Wage Variables for Evaluating Wages and Employment Effects: Evidence from Brazil

Author

Listed:
  • Lemos, Sara

    (University of Leicester)

Abstract

The international literature on minimum wage greatly lacks empirical evidence from developing countries. Brazil’s minimum wage policy is a distinctive and central feature of the Brazilian economy. Not only are increases in the minimum wage large and frequent but the minimum wage has also been used as an anti-inflation policy in addition to its social role. This study estimates the effects of the minimum wage on both wages and employment using panel data techniques and Brazilian monthly household data from 1982 to 2000 at individual and regional levels. A number of conceptual and identification questions is discussed, for example: (1) Various strategies on how to best measure the effect of a constant (national) minimum wage are summarized in a “menu” of minimum wage variables and used to estimate wage and employment effects. (2) An employment decomposition that separately estimates the effect of the minimum wage on hours worked and on the number of jobs is used. Robust results indicate that an increase in the minimum wage strongly compresses the wages distribution with moderately small adverse effects on employment.

Suggested Citation

  • Lemos, Sara, 2004. "A Menu of Minimum Wage Variables for Evaluating Wages and Employment Effects: Evidence from Brazil," IZA Discussion Papers 1069, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1069
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp1069.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. 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 1-31, December.
    3. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    4. Borjas, George J. & Freeman, Richard B. (ed.), 1992. "Immigration and the Work Force," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226066332, September.
    5. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, April.
    6. Machin, Stephen & Manning, Alan & Rahman, Lupin, 2002. "Where the minimum wage bites hard: the introduction of the UK national minimum wage to a low wage sector," LSE Research Online Documents on Economics 20070, London School of Economics and Political Science, LSE Library.
    7. 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.
    8. 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.
    9. 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.
    10. Alan B. Krueger & David Card, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply," American Economic Review, American Economic Association, vol. 90(5), pages 1397-1420, December.
    11. Richard B. Freeman & David A. Wise, 1982. "The Youth Labor Market Problem: Its Nature, Causes, and Consequences," NBER Books, National Bureau of Economic Research, Inc, number free82-1.
    12. 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.
    13. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
    14. Akerlof, George A, 1984. "Gift Exchange and Efficiency-Wage Theory: Four Views," American Economic Review, American Economic Association, vol. 74(2), pages 79-83, May.
    15. Sara Lemos, 2004. "The Effects of the Minimum Wage on Prices in Brazil," Labor and Demography 0403011, University Library of Munich, Germany.
    16. 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.
    17. 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 318-350, April.
    18. 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.
    19. 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).
    20. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," Working Papers 680, Princeton University, Department of Economics, Industrial Relations Section..
    21. Daniel S. Hamermesh, 2002. "International Labor Economics," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 709-732, October.
    22. Thomas R. Michl, 2000. "Can Rescheduling Explain the New Jersey Minimum Wage Studies?," Eastern Economic Journal, Eastern Economic Association, vol. 26(3), pages 265-276, Summer.
    23. Neumark, David & Wascher, William L., 2007. "Minimum Wages and Employment," Foundations and Trends(R) in Microeconomics, now publishers, vol. 3(1–2), pages 1-182, March.
    24. 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.
    25. Meyer, Robert H & Wise, David A, 1983. "Discontinuous Distributions and Missing Persons: The Minimum Wage and Unemployed Youth," Econometrica, Econometric Society, vol. 51(6), pages 1677-1698, November.
    26. Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 87-104, August.
    27. repec:fth:prinin:300 is not listed on IDEAS
    28. José Márcio Camargo, 1984. "Minimum wage in Brazil theory, policy and empirical evidence," Textos para discussão 67, Department of Economics PUC-Rio (Brazil).
    29. David Neumark & William Wascher, 1993. "Employment Effects of Minimum and Subminimum Wages: Reply to Card, Katz and Krueger," NBER Working Papers 4570, National Bureau of Economic Research, Inc.
    30. 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.
    31. 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.
    32. George J. Borjas & Richard B. Freeman, 1992. "Immigration and the Work Force: Economic Consequences for the United States and Source Areas," NBER Books, National Bureau of Economic Research, Inc, number borj92-1.
    33. Stephen Machin & Alan Manning, 1994. "The Effects of Minimum Wages on Wage Dispersion and Employment: Evidence from the U.K. Wages Councils," ILR Review, Cornell University, ILR School, vol. 47(2), pages 319-329, January.
    34. Green, Francis & Dickerson, Andy & Saba Arbache, Jorge, 2001. "A Picture of Wage Inequality and the Allocation of Labor Through a Period of Trade Liberalization: The Case of Brazil," World Development, Elsevier, vol. 29(11), pages 1923-1939, November.
    35. Juan Dolado & Francis Kramarz & Steven Machin & Alan Manning & David Margolis & Coen Teulings, 1996. "The Economic Impact of Minimum Wages in Europe," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00353896, HAL.
    36. Sara lemos, 2004. "The Effects of the Minimum Wage on Wages, Employment and Prices," Discussion Papers in Economics 04/10, Division of Economics, School of Business, University of Leicester.
    37. Linneman, Peter, 1982. "The Economic Impacts of Minimum Wage Laws: A New Look at an Old Question," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 443-469, June.
    38. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 97(4), pages 543-569.
    39. Francisco Carneiro & Andrew Henley, 1998. "Wage determination in Brazil: The growth of union bargaining power and informal employment," Journal of Development Studies, Taylor & Francis Journals, vol. 34(4), pages 117-138.
    40. David Neumark & William Wascher, 1992. "Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws," ILR Review, Cornell University, ILR School, vol. 46(1), pages 55-81, October.
    41. 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.
    42. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-649, May.
    43. Alida Castillo-Freeman & Richard B. Freeman, 1992. "When the Minimum Wage Really Bites: The Effect of the U.S.-Level Minimum on Puerto Rico," NBER Chapters, in: Immigration and the Work Force: Economic Consequences for the United States and Source Areas, pages 177-212, National Bureau of Economic Research, Inc.
    44. 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.
    45. 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 653-680, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rutledge, Zach & Richards, Timothy & Martin, Philip, 2023. "Adverse Effect Wage Rates and US Farm Wages," 2024 Allied Social Sciences Association (ASSA) Annual Meeting, January 5-7, 2024, San Antonio, Texas 339074, Agricultural and Applied Economics Association.
    2. Soundararajan, Vidhya, 2019. "Heterogeneous effects of imperfectly enforced minimum wages in low-wage labor markets," Journal of Development Economics, Elsevier, vol. 140(C), pages 355-374.
    3. Melanie Khamis, 2013. "Does the minimum wage have a higher impact on the informal than on the formal labour market? Evidence from quasi-experiments," Applied Economics, Taylor & Francis Journals, vol. 45(4), pages 477-495, February.
    4. Manoel BITTENCOURT, 2009. "Macroeconomic Performance And Inequality: Brazil, 1983–94," The Developing Economies, Institute of Developing Economies, vol. 47(1), pages 30-52, March.
    5. Neumark, David & Cunningham, Wendy & Siga, Lucas, 2006. "The effects of the minimum wage in Brazil on the distribution of family incomes: 1996-2001," Journal of Development Economics, Elsevier, vol. 80(1), pages 136-159, June.
    6. Arindrajit Dube & Attila Lindner, 2024. "Minimum Wages in the 21st Century," RF Berlin - CReAM Discussion Paper Series 2524, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    7. Calavrezo, Oana & Pelek, Selin, 2011. "Qui sont les salariés payés au niveau du salaire minimum? Une analyse empirique à partir de données turques," GIAM Working Papers 11-2, Galatasaray University Economic Research Center, revised 13 Feb 2011.
    8. M. Kemal Biçerli & Merve Kocaman, 2019. "The Impact Of Minimum Wage On Unemployment, Prices, And Growth: A Multivariate Analysis For Turkey," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 64(221), pages 65-84, April – J.
    9. Arindrajit Dube & Attila Lindner, 2024. "Minimum Wages in the 21st Century," RF Berlin - CReAM Discussion Paper Series 2524, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    10. Neumark, David & Munguía Corella, Luis Felipe, 2021. "Do minimum wages reduce employment in developing countries? A survey and exploration of conflicting evidence," World Development, Elsevier, vol. 137(C).
    11. Groisman, Fernando & Boffi, Santiago & Calero, Analía & Cuba, María Soledad & Liniado, Julia & Sconfienza, María Eugenia & Vergara Parra, Albano, 2015. "Social protection to the informal sector: the role of minimum wage and income transfer policies," MPRA Paper 72822, University Library of Munich, Germany.
    12. Fitriya & Abdul Basyith & Rabin Ibnu Zainal, 2020. "The Doubled-Edge Sword of Raising the Minimum Wage: The Case of Indonesia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(12), pages 1453-1465, December.
    13. Baensch Laura & Lanzalot Maria Laura & Lotti Giulia & Stucchi Rodolfo, 2019. "Do Labor Market Regulations Affect the Link between Innovation and Employment? Evidence from Latin America," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(3), pages 1-13, July.
    14. Sotomayor, Orlando J., 2021. "Can the minimum wage reduce poverty and inequality in the developing world? Evidence from Brazil," World Development, Elsevier, vol. 138(C).
    15. Boeri, Tito & Garibaldi, Pietro & Ribeiro, Marta, 2010. "Behind the Lighthouse Effect," IZA Discussion Papers 4890, Institute of Labor Economics (IZA).
    16. Gudibande, Rohan Ravindra & Jacob, Arun, 2020. "Minimum wages for domestic workers: impact evaluation of the Indian experience," World Development, Elsevier, vol. 130(C).
    17. Jiménez, Bruno, 2023. "The Political economy of the minimum wage," Labour Economics, Elsevier, vol. 85(C).
    18. Tito Boeri & Jan van Ours, 2013. "The Economics of Imperfect Labor Markets: Second Edition," Economics Books, Princeton University Press, edition 1, number 10142.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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 1-31, December.
    2. Sara Lemos, 2004. "Are Wage and Employment Effects Robust to Alternative Minimum Wage Variables?," Discussion Papers in Economics 04/4, Division of Economics, School of Business, University of Leicester.
    3. Sara Lemos, 2004. "The Effects of the Minimum Wage on Prices in Brazil," Labor and Demography 0403011, University Library of Munich, Germany.
    4. Lemos, Sara, 2009. "Minimum wage effects in a developing country," Labour Economics, Elsevier, vol. 16(2), pages 224-237, April.
    5. 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.
    6. Sara lemos, 2004. "The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil," Discussion Papers in Economics 04/8, Division of Economics, School of Business, University of Leicester.
    7. repec:eee:labchp:v:3:y:1999:i:pb:p:2101-2163 is not listed on IDEAS
    8. Sara Lemos, 2004. "The Effects Of The Minimum Wage On Wages And Employment In Brazil - A Menu Of Minimum Wage Variables," Labor and Demography 0403008, University Library of Munich, Germany.
    9. Christian Ragacs, 2003. "Mindestlöhne und Beschäftigung: Ein Überblick über die neuere empirische Literatur," Working Papers geewp25, Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
    10. Arindrajit Dube & Attila Lindner, 2024. "Minimum Wages in the 21st Century," RF Berlin - CReAM Discussion Paper Series 2524, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    11. Neumark David, 2019. "The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns," German Economic Review, De Gruyter, vol. 20(3), pages 293-329, August.
    12. Sara Lemos, 2007. "Minimum wage effects across the private and public sectors in Brazil," Journal of Development Studies, Taylor & Francis Journals, vol. 43(4), pages 700-720.
    13. David Neumark & Peter Shirley, 2022. "Myth or measurement: What does the new minimum wage research say about minimum wages and job loss in the United States?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 384-417, October.
    14. Ahmad Jafari Samimi, 2011. "Minimum Wage and Youth Employment The Case Study of Iran's Manufacturing Industries," Journal of Education and Vocational Research, AMH International, vol. 1(2), pages 38-43.
    15. 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.
    16. Tomas Kucera, 2020. "Are Employment Effects of Minimum Wage the Same Across the EU? A Meta-Regression Analysis," Working Papers IES 2020/2, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jan 2020.
    17. Young Cheol Jung & Adian McFarlane & Anupam Das, 2021. "The effect of minimum wages on consumption in Canada," The Economic and Labour Relations Review, , vol. 32(1), pages 65-89, March.
    18. Rigobon, Roberto & Lang, Kevin, 2004. "Comments," LSE Research Online Documents on Economics 123348, London School of Economics and Political Science, LSE Library.
    19. Carlos Oliveira, 2022. "How is the Minimum Wage Shaping the Wage Disitribution: Bite, Spillovers, and Wage Inequality," GEE Papers 0160, Gabinete de Estratégia e Estudos, Ministério da Economia, revised May 2022.
    20. Dolton, Peter & Bondibene, Chiara Rosazza & Stops, Michael, 2015. "Identifying the employment effect of invoking and changing the minimum wage: A spatial analysis of the UK," Labour Economics, Elsevier, vol. 37(C), pages 54-76.
    21. Kertesi, Gábor & Köllő, János, 2004. "A 2001. évi minimálbér-emelés foglalkoztatási következményei [The employment consequences of the 2001 rise in the minimum wage]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 293-324.

    More about this item

    Keywords

    public sector; informal sector; employment effect; wage effect; minimum wage; Brazil;
    All these keywords.

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp1069. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.