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Earnings Inequality and the Minimum Wage: Evidence from Brazil

Christian Moser () and Niklas Engbom
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Niklas Engbom: Princeton University

No 1521, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: We assess the extent to which a rise in the minimum wage can account for three facts characterizing a large decline in earnings inequality in Brazil from 1996--2012: (i) the decline is bottom-driven yet wide-spread; (ii) lower-tail inequality is negatively correlated with the bindingness of the minimum wage across Brazilian states over time; and (iii) a large share of the decline is due to a compression in the returns to firm and worker characteristics in pay. To this end, we build a general equilibrium search model with heterogeneous firms engaging in monopsonistic competition for heterogeneous workers. The rise in the minimum wage in our model explains 70 percent of the observed decline in the variance of log earnings, while being consistent with the above three facts.

New Economics Papers: this item is included in nep-dge and nep-lam
Date: 2017
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Related works:
Working Paper: Earnings Inequality and the Minimum Wage: Evidence from Brazil (2018) Downloads
Working Paper: Earnings Inequality and the Minimum Wage: Evidence from Brazil (2017) Downloads
Working Paper: Earnings Inequality and the Minimum Wage: Evidence from Brazil (2016)
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