Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/333673 
Year of Publication: 
2025
Series/Report no.: 
IZA Discussion Papers No. 18234
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
How do minimum wages affect informality? We study the near-doubling of the real minimum wage from 2000 to 2009 in Brazil, where 46% of the workforce is informal. Using labor force surveys covering the informal sector, we show the minimum wage exhibits near full passthrough to informal employees working in formal firms, about half of all informal employees. The formal-to-informal reallocation elasticity with respect to the formal wage is small: -0.28. Our findings illustrate how minimum wages can positively affect living standards for workers thought beyond the reach of labor law, a sizable share of the workforce in developing economies.
Subjects: 
minimum wages
informality
inequality
JEL: 
J23
J46
J88
Document Type: 
Working Paper

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