Working Paper: CEPR ID: DP16143
Authors: Niklas Engbom; Christian Moser
Abstract: We show that a 128 percent real increase in the minimum wage accounts for a large decline in earnings inequality in Brazil between 1996 and 2018. To this end, we combine administrative and survey data with an equilibrium model of the Brazilian labor market. Our results imply that the minimum wage has far-reaching spillover effects on wages higher up in the distribution, accounting for 45 percent of a large fall in earnings inequality over this period. At the same time, the effects of the minimum wage on employment and output are muted by reallocation of workers toward more productive firms.
Keywords: inequality; wage distribution; minimum wage; worker and firm heterogeneity; equilibrium search model; monopsony; spillover effects; reallocation; employment; brazil
JEL Codes: E24; E25; E61; E64; J31; J38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| minimum wage (J38) | worker reallocation (J62) |
| worker reallocation (J62) | mitigate negative effects on employment (J68) |
| minimum wage (J38) | wage gains at median and 75th percentiles (J31) |
| minimum wage binding nature and firm productivity dispersion (J31) | effects on inequality (F61) |
| minimum wage (J38) | earnings inequality (D31) |
| minimum wage (J38) | wage compression (J31) |
| minimum wage (J38) | variance of wages (J31) |