published as 'Minimum Wage Policy and Employment Effects: Evidence from Brazil' in: Economía: Journal of the Latin American and Caribbean Economic Association, 2004, 5 (1), 219-266
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.
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