Location of Repository

The Effect of the Minimum Wage on Prices in Brazil

By Sara Lemos

Abstract

There is very little empirical evidence on the effects of the minimum wage on prices in the international literature and none whatsoever for developing countries. This paper estimates the minimum wage price effect using monthly Brazilian household and firm data from 1982 to 2000 aggregated at a regional level. Empirical evidence on price effects will help to answer the question of who pays for the higher costs: firms, consumers or the unemployed. The answer to this question is a contribution to the controversial recent debate in the literature over the direction of the minimum wage employment effect. Employment might not be affected if firms are able to pass through to prices the higher labour costs associated to a minimum wage increase. In that case, consumers pay for the increase. Furthermore, if the poor consumers are those buying minimum wage labour intensive goods, or if these goods represent a large proportion of their consumption bundle, then minimum wage increases might hurt rather than aid the poor. Moreover, if minimum wage increases cause inflation, they will hurt the poor further, who disproportionately suffer from it. Robust results indicate that the minimum wage raises overall prices in Brazil. The resulting inflation is slightly higher for the poor than for the rich in the long run, smaller in low inflation periods, and larger in poorer regions

Topics: minimum wage, wage effect, employment effect, price effect, cost shock.
Publisher: Dept. of Economics, University of Leicester
Year: 2004
OAI identifier: oai:lra.le.ac.uk:2381/4625

Suggested articles

Preview

Citations

  1. (2003a): “Robust Quantification of Minimum Wage Effects On Wages And Employment Using a New Data Set - A Menu Of Minimum Wage Variables”, UCL Working Paper.
  2. (1992). A Ordem Do Progresso. doi
  3. (2000). A Reassessment of the New Economics of the Minimum Wage Literature with Monthly Data from the Current Population Survey," doi
  4. (1981). A Simulation Model of the Effect of an Increase in the Minimum Wage on Employment, Output and the Price Level,"
  5. (1999). Distributional Effects of the Minimum Wage: Who Benefits and Who Pays for Increases in the Federal Minimum Wage 1996/97 and 1999/2000,"
  6. (1992). Do Minimum Wages Reduce Employment? A Case Paper of California, 1987-89," doi
  7. (1982). Economic Determinants of Geographic and Individual Variation in the Labor Market Position of Young Persons,"
  8. (1981). Effects of Minimum Wage Policy on Inflation and on Output, Prices, Employment and Real Wage Rates by Industry,"
  9. (1978). Effects of Minimum Wages on the Level and Age Composition of Youth Employment," doi
  10. (1996). Examining the Evidence on Minimum Wages and Employment,"
  11. (1997). Exchange Rate Pass-through in U.S. Manufacturing Industries," doi
  12. (1970). Experience of the Past: The National Minimum, Youth Unemployment and Minimum Wages,"
  13. (1997). Goods Prices and Exchange Rates: What Have We Learned?," doi
  14. (1981). Government Intervention in the Inflation Process: The Econometrics of "Self-Inflicted Wounds"," doi
  15. (2002). How Do Retail Prices React to Minimum Wage Increases?,"
  16. (1981). Impact of Minimum Wage Legislation on Wage and Price Inflation,"
  17. (1976). Impact of Minimum Wages on Other Wages, Employment, and Family Incomes," doi
  18. (1996). Incomplete Exchange-Rate Pass-through and Imperfect Competition: The Effect of Local Production,"
  19. (1998). Increasing the Mandated Minimum Wage: Who Pays the Price?," Unpublished Paper.
  20. (2000). Increasing the Minimum Wage: California's Winners and Losers," Public Policy Institute of California Discussion
  21. (1993). Inflation and Price Adjustment: A Survey of Findings from Micro-Data,"
  22. (1982). Inflation, Flexible Exchange Rates, and the Natural Rate of Unemployment," in "Workers, Jobs and Inflation", doi
  23. (1997). Instrumental Variables Regression with Weak Instruments," doi
  24. (1965). Labor Standard Act doi
  25. (1969). Minimum Wage and Maximum Hours Standards under the Fair Labor Standards Act. doi
  26. (2003). Minimum Wages in Latin America," doi
  27. (1994). Minimum Wages--Again!," doi
  28. (1999). Minimum Wages, Employment, and the Distribution of Income," doi
  29. (1980). Minimum Wages, Fringe Benefits and Working Conditions. doi
  30. (1995). Myth and Measurement: The New Economics of the Minimum Wage. doi
  31. (2001). Price Pass-through and the Minimum Wage," doi
  32. (1993). Quem Ganha Salario Minimo No Brasil?,"
  33. (1994). Raising the Floor - the Effects of the Minimum Wage on Low-Wage Workers,"
  34. (2002). Rendimentos E Precos,"
  35. (1981). Report of the Minimum Wage Study Commission.
  36. (1996). Retail Price Reactions to Changes in State and Local Sales Taxes,"
  37. (2002). Salario Minimo E Bem Estar Social No Brasil: Uma Resenha Da Literatura,"
  38. (1999). Sales Taxes and Prices: An Empirical Analysis," doi
  39. (1996). Structural Aspects of Oecd Unemployment," doi
  40. (1996). The Economic Impact of Minimum Wages in Europe," Economic Policy: doi
  41. (2004). The effect of the Minimum Wage on Prices”, Unpublished Paper.
  42. (1992). The Effect of the Minimum Wage on the Fast-Food Industry," doi
  43. (1999). The Impact of Minimum Wage Increases on Food and Kindred Products Price: An Analysis of Price Pass-Through,"
  44. (2001). The Impacts of the Minimum Wage on the Labor Market, Poverty and Fiscal Budget in Brazil," doi
  45. (1996). The Minimum Wage as a Redistributive Tool," doi
  46. (1988). The New Keynesian Economics and the Output-Inflation Trade-Off," Brookings Papers on Economic Activity, doi
  47. (1997). The New Neoclassical Synthesis and the Role of Monetary Policy," doi
  48. (1997). The Response of Exchange Rate Pass-through to Market Concentration in a Small Economy: The Evidence from Korea," doi
  49. (1934). The Sales Taxes in the American States. doi
  50. (1987). The Theory of Tax Incidence," doi
  51. (2002). Uma Resenha Empirica Sobre Os Efeitos Do Salario Minimo No Mercado De Trabalho Brasileiro," doi
  52. (1986). Unemployment in Britain," London
  53. (1985). Unemployment, Real Wages, and Aggregate Demand doi
  54. (2003). Where the Minimum Wage Bites Hard: Introduction of Minimum Wages to a Low Wage Sector," doi
  55. (2000). Who Pays for Increases in the Minimum Wage: Distributional Effects Assuming Price Pass-Through,"
  56. (1997). Who Will Be Affected by Welfare Reform in California,"
  57. (2001). Winners and Losers of Federal and State Minimum Wages," Employment Policies Institute Foundation Paper,

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.