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Minimum Wage Effects on Wages, Employment and Prices in Brazil

In: Aspects of Worker Well-Being

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  • Sara Lemos

Abstract

This paper presents new evidence on the effects of the minimum wage using Brazilian monthly household and firm panel data between 1982 and 2000. By examining the effects on wages, employment and prices together we are able to provide an explanation for the small employment effects prevalent in the literature. Our principal finding is that increasing the minimum wage raises wages and prices with small adverse employment effects. This suggests a general wage-price inflationary spiral, where persistent inflation offsets some of the wage gains. The main policy implication deriving from these results is that the potential of the minimum wage for the policy maker as a tool to help the poor is bigger under low inflation. Under high inflation, the resulting wage-price spiral makes the minimum wage increase – as well as its antipoverty policy potential – short lived. In this case, the wage effects are volatile and the permanent scars are lower employment and higher inflation in Brazil.

Suggested Citation

  • Sara Lemos, 2007. "Minimum Wage Effects on Wages, Employment and Prices in Brazil," Research in Labor Economics, in: Aspects of Worker Well-Being, pages 397-413, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:rleczz:s0147-9121(06)26011-4
    DOI: 10.1016/S0147-9121(06)26011-4
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    Cited by:

    1. Isaac Sorkin, 2015. "Are There Long-Run Effects of the Minimum Wage?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 306-333, April.
    2. Köse, Nezir & Ünal, Emre, 2021. "The effects of the oil price and oil price volatility on inflation in Turkey," Energy, Elsevier, vol. 226(C).

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