Minimum Wage Effects Throughout the Wage Distribution: Evidence from Brazil's Formal and Informal Sectors

CEDEPLAR Working Paper No. 151

57 Pages Posted: 25 May 2001

See all articles by Pablo Fajnzylber

Pablo Fajnzylber

World Bank - Economic Development Institute; Federal University of Minas Gerais

Date Written: May 2001

Abstract

This paper investigates the effects of minimum wages on the income and employment of individuals, using longitudinal data from Brazil's Monthly Employment Survey over the 1982-1997 period. We use information on 541,194 individuals, for which we consider data from two interviews performed 12 months apart. Our sample is restricted to workers aged 15 to 65 in the first interview, that were (initially) employed as formal salaried (62%), informal salaried (20%) or self-employed (18%). We provide detailed estimates of minimum wage effects at different points of the complete wage distribution, and calculate both contemporaneous and lagged effects, for formal and informal workers. We also estimate, indirectly, the effect of minimum wages on the probability of transitioning into different sectors of the labor market: salaried formal and informal work, self-employment, unemployment and inactivity. In order to provide some insight into the potential effects of minimum wages on family welfare and poverty, we obtain separate estimates for men and women, for workers under and above age 21, and for household heads and non-heads. We find significant minimum wage effects across the whole wage distribution, and both in the formal and the informal sectors. We also find that the total impact of minimum wages on workers earnings (derived from current and lagged effects) is positive but smaller than the contemporaneous one. As for employment elasticities, our estimates suggest that they are negative for most low-wage workers, being lower in absolute value for formal salaried workers (around -0.1 at the bottom of the wage distribution) than for low-wage informal salaried and self employed (between -0.25 and -0.35). Other results include higher earnings elasticities for men, adults and heads of households than for women, teenagers and non-heads, respectively.

Keywords: minimum wage, wage distribution

JEL Classification: J23, J31, J38

Suggested Citation

Fajnzylber, Pablo R., Minimum Wage Effects Throughout the Wage Distribution: Evidence from Brazil's Formal and Informal Sectors (May 2001). CEDEPLAR Working Paper No. 151. Available at SSRN: https://ssrn.com/abstract=269622 or http://dx.doi.org/10.2139/ssrn.269622

Pablo R. Fajnzylber (Contact Author)

World Bank - Economic Development Institute ( email )

1818 H Street
Washington, DC 20433
United States

Federal University of Minas Gerais ( email )

Rua Curitiba, 832
CEDEPLAR 9 Andar
MG30170-120 Belo Horizonte
Brazil
+55 31 32799162 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
594
Abstract Views
3,218
rank
44,442
PlumX Metrics