Political Variables as Instruments for the Minimum Wage

Sara Lemos ()

No 04/11, Discussion Papers in Economics from Department of Economics, 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 non-negative 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.

Keywords: minimum wage; wage effect; employment effect; instruments; political variables; Brazil (search for similar items in EconPapers)
JEL-codes: J38 (search for similar items in EconPapers)
Date: 2004-04
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Related works:
Journal Article: Political Variables as Instruments for the Minimum Wage (2005)
Working Paper: Political Variables as Instruments for the Minimum Wage (2004)
Working Paper: Political Variables as Instruments for the Minimum Wage (2004)
Working Paper: Political Variables as Instruments for the Minimum Wage (2003)
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