Working Paper: NBER ID: w28831
Authors: Niklas Engbom; Christian Moser
Abstract: We show that a rise in the minimum wage accounts for a large decline in earnings inequality in Brazil since 1994. To this end, we combine rich 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 one-third of the 25.9 log point fall in the variance of log earnings in Brazil since 1994. At the same time, the minimum wage’s effects on employment and output are muted by reallocation of workers toward more productive firms.
Keywords: minimum wage; earnings inequality; Brazil; labor market policies
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 Increase (J38) | Lower Earnings Inequality (J31) |
| Minimum Wage Increase (J38) | Higher Wages across Distribution (D39) |
| Minimum Wage Increase (J38) | Worker Reallocation to More Productive Firms (J69) |
| Minimum Wage Increase (J38) | Muted Negative Effects on Employment (J79) |
| Minimum Wage Increase (J38) | Decline in Earnings Inequality since 1994 (J70) |