published as: 'Comparing Employment Estimates Using Different Minimum Wage Variables: the case of Brazil' in: International Review of Applied Economic, 2009, 23(4), 405-425.
A national minimum wage cannot explain variation in wages or employment across regions.
Identification of the effect of the minimum wage separately from the effect of other variables
on wages or employment requires regional variation. Many minimum wage variables with
regional variation have been suggested in the literature. Such a variety of variables makes it
difficult to compare estimates across studies. First, estimates using different minimum wage
variables are not always calibrated to represent the effect of a 10% increase in the minimum
wage on wages or employment. Second, different minimum wage variables might simply
measure the effect of the minimum wage on different workers. Part of the controversial recent
debate in the literature over the magnitude and direction of the employment effect might be
that non-directly comparable estimates are being compared. This paper estimates and
critically compares the effects of the minimum wage on both wages and employment using
five minimum wage variables common in the literature: real minimum wage, "Kaitz index",
"fraction affected", "fraction at" and "fraction below" the minimum wage. The data used is a
Brazilian monthly household survey from 1982 to 2000. The estimates are robust and
indicate that an increase in the minimum wage compresses the wages distribution with small
adverse effects on employment.
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