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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Friebel, Guido / Requate, Till / Tsui, Kevin / Wichardt, Philipp / Zulehner, Christine

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Political Variables as Instruments for the Minimum Wage

Sara Lemos1

1University of Leicester,

Citation Information: Contributions in Economic Analysis & Policy. Volume 4, Issue 1, ISSN (Online) 1538-0645, DOI: 10.2202/1538-0645.1425, December 2005

Publication History

Published Online:
2005-12-28

Abstract

A number of recent empirical studies have found no evidence that the minimum wage adversely affects employment. Explanations for such non-negative estimates include new theoretical approaches, empirical identification and data issues. In this paper we examine the robustness of such estimates to concerns about bias arising from the simultaneous determination of employment and the minimum wage. We use a number of novel political variables as instruments to control for this source of endogeneity. We exploit the personal characteristics of the politicians voting on minimum wage bills, their voting behavior and their electoral process. Our main conclusion is that the weak relationship between minimum wages and employment does not appear to be driven by endogeneity.

Keywords: minimum wage; labour costs; political variables; instrumental variables; Brazil

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