Political Variables as Instruments for the Minimum Wage

Sara Lemos

No 1136, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: minimum wage; instruments; employment effect; wage effect; political variables; Brazil (search for similar items in EconPapers)
JEL-codes: J38 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2004-05
New Economics Papers: this item is included in nep-pol
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Published - published in: B.E. Journal of Economic Analysis and Policy: Contributions to Economic Analysis and Policy, 2005, 4 (1), Art.16

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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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