This paper studies the labor supply contributions to individual and family earnings inequality during the period of rising wage inequality in the early 1980's. Working couples have positively correlated labor market outcomes, which are almost entirely attributable to permanent factors. An intertemporal family labor supply model with this feature is used to estimate labor supply elasticities for husbands of 0.05, and wives of 0.40. This implies that labor supply explains little of the rising annual earnings inequality for married men, but over 20 percent of the rise in family inequality and 50 percent of the modest rise in female inequality. (JEL C23, J22)
This paper analyzes the contribution of the minimum wage to the well documented rise in earnings inequality in Mexico between the late 1980s and the early 2000s. We find that a substantial part of the growth in inequality, and essentially all of the growth in inequality in the bottom end of the distribution, is due to the steep decline in the real value of the minimum wage. (JEL J31, J38, O15, O17, O18, R23)
We reassess the effect of minimum wages on US earnings inequality using additional decades of data and an IV strategy that addresses potential biases in prior work. We find that the minimum wage reduces inequality in the lower tail of the wage distribution, though by substantially less than previous estimates, suggesting that rising lower tail inequality after 1980 primarily reflects underlying wage structure changes rather than an unmasking of latent inequality. These wage effects extend to percentiles where the minimum is nominally nonbinding, implying spillovers. We are unable to reject that these spillovers are due to reporting artifacts, however. (JEL J22, J31, J38, K31)
Earnings Inequality and the Minimum Wage: Evidence from Brazil
