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Minimum Wage, “Lighthouse Effect” and Poverty

Author

Listed:
  • Marcelo Neri
  • Gustavo Gonzaga
  • José Márcio Camargo

Abstract

This paper evaluates the effectiveness of the minimum wage policy in various segments of Brazilian labor markets. Our basic technique is to quantify corner solutions imposed by the minimum wage. These points are later used as a focalization mechanism in the simulation of upper bounds of the effects of the minimum wage on poverty measures. We highlight the importance of two unusual effects of the minimum wage, i) The high percentage of informal employees receiving exactly one minimum wage, this enhances the effects of the minimum on poverty, and ii) The use of the minimum wage as a numeraire in wage determination, in particular within the formal sector. JEL Classification: J31; J38.

Suggested Citation

  • Marcelo Neri & Gustavo Gonzaga & José Márcio Camargo, 2001. "Minimum Wage, “Lighthouse Effect” and Poverty," Brazilian Journal of Political Economy, Center of Political Economy, vol. 21(2), pages 263-276.
    • Handle: RePEc:ekm:repojs:v:21:y:2001:i:2:p:263-276:id:975
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    More about this item

    Keywords

    Minimum wage; inequality; poverty;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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