Resource title

The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil

Resource image

image for OpenScout resource :: The Effects of the Minimum Wage in the Formal and Informal Sectors in Brazil

Resource description

The minimum wage literature is very limited on empirical evidence for developing countries. This already limited literature is even more limited on the effects of the minimum wage in the informal sector, where most of the poor are. Extending the understanding of minimum wage effects both in developing countries and in particular in the informal sector is crucial if the minimum wage is to be used as a policy to help poor people in poor countries. This paper estimates wage and employment effects, accounting for sorting into the formal and informal sectors. The data used is a monthly Brazilian household survey from 1982 to 2000 at individual and regional levels. The formal and informal sectors employment effects were both found to be negative, consistent with the presence of a large spike, substantial spillover effects, and the associated compression effect in the wage distribution of both sectors. This suggests a downwards sloping labour demand curve in both sectors, challenging the standard Two Sectors Model as inadequate to explain the effect of the minimum wage on the formal and informal sectors in Brazil and in Latin America more generally.

Resource author

Sara Lemos

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/20324

Resource license

Adapt according to the presented license agreement and reference the original author.