Estimating Effects of the Minimum Wage in a Developing Country: A Density Discontinuity Design Approach

Hugo Jales

No 184, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: This paper proposes a new framework to identify the effects of the minimum wage on the joint distribution of sector and wages in a developing country. I show that under reasonable assumptions, cross-sectional data on the worker's wage and sector can identify the joint distribution of the latent counterparts of these variables; that is, the sector status and wage that would prevail in the absence of the minimum wage. I apply the method in the “PNAD”, a nationwide representative Brazilian cross-sectional dataset for the years 2001 to 2009. The results indicate that the size of the informal sector is increased by around 39% compared to what would prevail in the absence of the minimum wage, an effect attributable to (i) unemployment effects of the minimum wage on the formal sector, (ii) movements of workers from the formal to the informal sector as a response to the policy.

Keywords: Minimum Wage; Informality; Unemployment; Density Discontinuity Design; Wage Inequality; Labor Tax Revenues; Formal Sector (search for similar items in EconPapers)
JEL-codes: J30 J31 J60 (search for similar items in EconPapers)
Pages: 74 pages
Date: 2015-10
New Economics Papers: this item is included in nep-iue and nep-lab
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Citations: View citations in EconPapers (3)

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https://surface.syr.edu/cpr/216/ (application/pdf)

Related works:
Journal Article: Estimating the effects of the minimum wage in a developing country: A density discontinuity design approach (2018)
Working Paper: Estimating the effects of the minimum wage in a developing country: A density discontinuity design approach (2017)
Working Paper: Estimating the Effects of Minimum Wage in a Developing Country: A Density Discontinuity Design Approach (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:max:cprwps:184

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