Earnings Inequality and the Minimum Wage: Evidence from Brazil

63 Pages Posted: 24 Mar 2017

See all articles by Niklas Engbom

Niklas Engbom

Federal Reserve Bank of Minneapolis

Christian Moser

Columbia University

Multiple version iconThere are 2 versions of this paper

Date Written: February 28, 2017

Abstract

We quantify the effect of a minimum wage on compression throughout the earnings distribution. Using the case of Brazil, which experienced a large decrease in earnings inequality while its real minimum wage increased from 1996-2012, we document that the inequality decrease was bottom-driven yet widespread, with compression up to the 75th earnings percentile. We develop an equilibrium search model with heterogeneous firms and workers and find that effects of the minimum wage are consistent with the above facts, explaining 70 percent of the observed inequality decrease, with half of the decrease due to spillovers further up the earnings distribution.

Keywords: Worker and Firm Heterogeneity, Minimum Wage, Matched Employer-Employee Data, Equilibrium Search Model

JEL Classification: E24, E61, J31

Suggested Citation

Engbom, Niklas and Moser, Christian, Earnings Inequality and the Minimum Wage: Evidence from Brazil (February 28, 2017). CESifo Working Paper Series No. 6393. Available at SSRN: https://ssrn.com/abstract=2940013

Niklas Engbom

Federal Reserve Bank of Minneapolis ( email )

120 Hennepin ave
Minneapolis, MN 55401
United States

Christian Moser (Contact Author)

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States
6093564653 (Phone)

HOME PAGE: http://www.economoser.com

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