The effects of local wage floors for labor market outcomes: a new empirical approach

Abstract

This paper evaluates the introduction of Brazilian regional and occupational wage floors on labor market performance. We focus on two out of five states that implemented such intervention: Paraná and São Paulo. In each state, we have analyzed the effects of the wage floors for three distinct occupational categories. Our results point that one occupational group in each state seems to be affected by the introduction of a wage floor. In both cases, the wage floor tends to reduce the share of employees with wages below the established floor without producing side effect on employment or on informality. It was not found any significant effect of the new legislation in the other occupational groups in each state. We innovate on methodological grounds by using the synthetic control method put forward by Abadie et al. (2010).