author: Sotomayor, Orlando J.
year: 2020
title: Can the minimum wage reduce poverty and inequality in the developing world? Evidence from Brazil
publisher: World Development
uri: https://doi.org/10.1016/j.worlddev.2020.105182
pubtype: article
discipline: economics

country: Brazil
period: 1995-2015
maxlength: 12
targeting: implicit
group: workers
data: national administrative surveys Monthly Employment survey (PME)

design: quasi-experimental
method: difference-in-difference estimator
sample: 40000
unit: household
representativeness: national
causal: 1

theory:
limitations: survey data limited to per dwelling, can not account for inhabitants moving
observation:
  - intervention: minimum wage
    institutional: 1
    structural: 0
    agency: 0
    inequality: income
    type: 0
    indicator: 0
    measures: poverty
    findings: within three months of minimum wage increases poverty declined by 2.8%
    channels: 
    direction: -1
    significance: 2
  - intervention: minimum wage
    institutional: 1
    structural: 0
    agency: 0
    inequality: income
    type: 0
    indicator: 1
    measures: Gini coeff
    findings: inequality declined by 2.4%; decreasing impact over time; diminishing returns when minimum is high relative to median earnings
    channels: unemployment costs (job losses) overwhelmed by benefits (higher wages); but inelastic relationship of increase and changes in poverty
    direction: -1
    significance: 2

notes:
annotation: |
  A study on the impact of subsequent minimum wage floor introductions on poverty and income inequality in Brazil.
  It finds that in the short-term (3 months) wage floor increases reduced poverty by 2.8% and reduced income inequality by 2.4%.
  Over the longer-term these impacts decrease, and the minimum wage increases only show diminishing returns when the legal minimum is already high in relation to median earnings.
  It suggests that additional unemployment costs, created through new job losses through the introduction, are offset by the increased benefits --- the higher wages for workers.
  The authors also suggest an inelastic relationship between increases and poverty incidence.
  One limitation of the study is the limit of tracking individuals in the underlying data which can not account for people moving household to new locations.
  The data can only track individual dwellings --- instead of the households and inhabitants within --- and thus resembles repeated cross-sectional data more than actual panel data.

