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Political Variables as Instruments for the Minimum Wage

Author

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  • Lemos, Sara

    (University of Leicester)

Abstract
Following the early 1980s apparent consensus, there has been a controversial debate in the literature over the direction of the minimum wage employment effect. Explanations to nonnegative effects range from theoretical to empirical identification and data issues. An explanation, however, that has not been sufficiently explored is that a non-negative effect might be an upward biased estimate of a truly negative effect, resulting from the simultaneous determination of the minimum wage and employment. This paper estimates the employment effect of the minimum wage using a number of political variables – not previously used in the literature – as excluded exogenous instruments to control for the endogeneity of the minimum wage variable. The data used is an under-explored Brazilian monthly household survey from 1982 to 2000. Robust results indicate that an increase in the minimum wage has very small adverse effects on employment.

Suggested Citation

  • Lemos, Sara, 2004. "Political Variables as Instruments for the Minimum Wage," IZA Discussion Papers 1136, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1136
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    Cited by:

    1. Frings Hanna, 2013. "The Employment Effect of Industry- Specific, Collectively Bargained Minimum Wages," German Economic Review, De Gruyter, vol. 14(3), pages 258-281, August.
    2. Lemos, Sara, 2004. "The Effects of the Minimum Wage on Wages, Employment and Prices," IZA Discussion Papers 1135, Institute of Labor Economics (IZA).
    3. Josip Lesica, 2018. "Lobbying For Minimum Wages," Economic Inquiry, Western Economic Association International, vol. 56(4), pages 2027-2057, October.
    4. Christl, Michael & Köppl Turyna, Monika & Kucsera, Denes, 2015. "Employment effects of minimum wages in Europe revisited," MPRA Paper 65761, University Library of Munich, Germany.
    5. Sara Lemos, 2004. "The Effects of the Minimum Wage on Prices in Brazil," Labor and Demography 0403011, University Library of Munich, Germany.
    6. Fernando Borraz & Nicolás Gonzalez Pampillón, 2011. "Assessing the Distributive Impact of More than Doubling the Minimum Wage: The Case of Uruguay," Documentos de Trabajo (working papers) 1711, Department of Economics - dECON.
    7. Hanna Frings, 2012. "The Employment Effect of Industry-Specific, Collectively-Bargained Minimum Wages," Ruhr Economic Papers 0348, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    8. Sara Lemos, 2004. "A Menu of Minimum Wage Variables for Evaluating Wages and Employment Effects: Evidence from Brazil," Discussion Papers in Economics 04/3, Division of Economics, School of Business, University of Leicester.
    9. 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).
    10. Sen, Anindya & Rybczynski, Kathleen & Van De Waal, Corey, 2011. "Teen employment, poverty, and the minimum wage: Evidence from Canada," Labour Economics, Elsevier, vol. 18(1), pages 36-47, January.
    11. Fernando Borraz & Nicolás González-Pampillón, 2017. "Assessing the distributive effects of minimum wage," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 1081-1112, November.
    12. Lemos, Sara, 2004. "The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil," IZA Discussion Papers 1089, Institute of Labor Economics (IZA).
    13. Jellal, Mohamed, 2012. "Maroc salaire minimum emploi et pauvreté [Morocco minimum wage employment and poverty]," MPRA Paper 38491, University Library of Munich, Germany.
    14. 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.
    15. Lemos, Sara, 2009. "Minimum wage effects in a developing country," Labour Economics, Elsevier, vol. 16(2), pages 224-237, April.
    16. Michael Christl & Monika Köppl‐Turyna & Dénes Kucsera, 2018. "Revisiting the Employment Effects of Minimum Wages in Europe," German Economic Review, Verein für Socialpolitik, vol. 19(4), pages 426-465, November.
    17. Kate Rybczynski & Anindya Sen, 2018. "Employment Effects Of The Minimum Wage: Panel Data Evidence From Canadian Provinces," Contemporary Economic Policy, Western Economic Association International, vol. 36(1), pages 116-135, January.
    18. repec:zbw:rwirep:0348 is not listed on IDEAS
    19. Bin Gu & Jaehong Park & Prabhudev Konana, 2012. "Research Note ---The Impact of External Word-of-Mouth Sources on Retailer Sales of High-Involvement Products," Information Systems Research, INFORMS, vol. 23(1), pages 182-196, March.

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    More about this item

    Keywords

    minimum wage; instruments; employment effect; wage effect; political variables; Brazil;
    All these keywords.

    JEL classification:

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

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