Results from the robustness tests

Additionally, for robustness testing purpose, using our preferred dataset (3) (that corresponds to the firms with up to five employees in 2005 and any number of employees in the years of 2006 and 2007), we want to analyze the results regarding the variation of the parameter that defines the binding salary firms.

Table 5 presents the results of equation (1) considering the firm’s binding salary parameters of 20%, 30% and 50% respectively, and these results are robust to the ones from the baseline Equation (1) with 10% parameter. We also find that as we increase the percentage of the binding salary parameter, the negative effect of the minimum wage in the number of employees of the binding salary firms, relatively to the control group, tends to decline.

-0,4 -0,35 -0,3 -0,25 -0,2 -0,15 -0,1 -0,05 0 0,05 0,1

5 50 All

Mean of Variable of Interest

Number of Employees

TABLE 5

Regression results for equation (1) using different firm’s binding salary parameters

Dependent variable: Number of Employees

Firm’s binding salary parameter

Minimum wage (b) 0.01258*** 0.01283*** 0.01324***

(0.00126) (0.00129) (0.00137) Interaction of variables (a) and (b) -0.00435*** -0.00404*** -0.00364***

(0.00084) (0.00086) (0.00092)

Intercept 80.54793*** 79.00147*** 78.45767***

(56.69350) (57.28553) (57.90565)

Observations 3,154,554 3,694,623 3,699,780

Notes: **, ***, significant at 5% and 1% respectively. Dataset (3) is the firms with 5 employees for the year of 2005 and with any number of employees for the years of 2006 and 2007. The Interaction of variables (a) and (b) is the variable of interest.

The Dummy that indicates the binding salary firms is the treatment variable.

3.5. Conclusion

The overall results reveal that the variation of the minimum wage has a significant and negative impact on small firms that pay on average a salary very close to the mandated minimum wage, when comparing to the others with higher salaries.

Using data on small firms from the years of 2005, 2006 and 2007, and the variation of the minimum wage for the same period, we find that the raise of 16.67% of the mandated minimum wage from 2005 to 2006 has a negative effect in the number of employees of the binding salary small firms in comparison to the control group.

It suggests that although the overall results indicate the small firms hired more workers between 2005 and 2007, the increase of jobs was smaller for the binding salary firms comparing to the firms with higher salaries.

The significant raise of the mandated minimum wage observed in 2006 was considered as a shock of costs to the small firms that pay close to the minimum since they have low margin to absorb such a raise of their fixed costs, creating a risk from the financial perspective, about their sustainability in the long term.

This might lead some of these small firms to reduce the number of employees in order to stay in the market and that might have a secondary negative effect in the low-wage jobs.

REFERÊNCIAS

ABIAD, A.; FURCERI, D.; TOPALOVA, P. The Macroeconomic Effects of Public Investment:

Evidence from Advanced Economies, IMF Working Paper, 1995.

BARBOSA, Magno C F. Uma avaliação do programa de modernização da administração pública tributária (PMAT) sobre o esforço fiscal dos municípios (2000 a 2010), Dissertação de Mestrado, 2013.

BAST, Myriã T N. Uma avaliação empírica dos efeitos dos empréstimos do BNDES aos governos municipais brasileiros, 2015.

BETTENDORF L.J.H.; LEJOURY A.; RIET M. Tax bunching by owners of small corporations, CPB Discussion Paper, No. 326, March 2016.

BIVENS, Josh. The potential macroeconomic benefits from increasing infrastructure investment, Economic Policy Institute, July 2017.

BNDES. PROVIAS terá R$ 300 milhões do BNDES para investimento de prefeituras em rodovias. Em:

https://www.bndes.gov.br/wps/portal/site/home/imprensa/noticias/conteudo/20060425_not053_06 . Acesso em 25/04/2006.

BURDETT K.; MORTENSEN D.T. Equilibrium Wage Differentials and Employer Size, Discussion Paper, No. 860, 1989.

CLEMENS J. How Do Firms Respond to Minimum Wage Increases? Understanding the Relevance of Non-Employment Margins, Journal of Economic Perspectives, Vol 35, No. 1, 2021.

CURRISTINE T., LONTI Z., JOUMARD I. Improving Public Sector Efficiency: Challenges and Opportunities, OECD Journal on Budgeting, Vol. 7, No. 1, 2007.

DA SILVA, Hudson P.; CALEGARI, Tales V. Políticas públicas para ampliação da arrecadação tributária municipal: considerações sobre o programa de modernização da administração tributária e dos setores sociais básicos (PMAT), Revista Temas de Administração Pública, Vol. 10, No. 1., 2015.

DRAKA M.; MACHIN S.; REENEN J. V. Minimum Wages and Firm Profitability, American Economic Journal: Applied Economics 3, p. 129-151, Jan 2011.

FERRAZ, J C.; LEAL, C F C.; MARQUES, F S.; MITERHOF M T. O BNDES e o Financiamento do Desenvolvimento, Dossiê Caminhos do Desenvolvimento, 2012.

FOREMNYA D.; JOFRE-MONSENYA J.; SOLÉ-OLLÉ A. ‘Ghost citizens’: Using notches to identify manipulation of population-based grants, Journal of Public Economics 154, p.49–66, 2017.

GADENNE, L. Tax Me, But Spend Wisely? Sources of Public Finance and Government Accountability, Warwick Economics Research Papers, 2016.

INMAN, R.P.The Flypaper Effect, NBER Working Paper No. 14579, December 2008

JALES H.; YU Z. Minimum Wage and Informality in a Roy Bargaining Economy: Evidence from a Bunching Estimator, Working paper, 2020.

KATZ L. F.; KRUEGER A. B. The Effect of the Minimum Wage on the Fast-Food Industry, Industrial and Labor Relations Review, Vol. 46, Issue 1, 1992.

KLEVEN H. J. Bunching, Annual Reviews of Economics, Vol. 8, 2016.

KLEVEN, H. J., WASEEM, M. Using notches to uncover optimization frictions and structural elasticities: theory and evidence from Pakistan. Q. J. Econ. 128 (2), 669–723, 2013.

MANNING A. The Elusive Employment Effect of the Minimum Wage, Journal of Economic Perspectives, v. 35, no. 1, p. 3-26, 2021.

MARCONI, N.; ARVATE, P.; MOURA NETO, J.S.; PALOMBO, P.E.M. Vertical transfers and the appropriation of resources by the bureaucracy: the case of Brazilian state governments, Public Choice, 141: p. 65-85, 2009.

Micro e pequenas empresas geram 27% do PIB do Brasil. SEBRAE. Disponível em:

https://www.sebrae.com.br/sites/PortalSebrae/ufs/mt/noticias/micro-e-pequenas-empresas-geram-

27-do-pib-do-brasil,ad0fc70646467410VgnVCM2000003c74010aRCRD#:~:text=Juntas%2C%20as%20cerca%

20de%209,presidente%20do%20Sebrae%2C%20Luiz%20Barretto

MOURA R. L.; NERI M. C. Efetividade do “salário mínimo estadual”: uma análise via regressões quantílicas para dados longitudinais, Economia Aplicada, v. 12, no. 2, p. 239-273, abril-junho 2008.

NERI M.; GONZAGA G., CAMARGO J. M. Salário Mínimo, “Efeito-Farol” e Pobreza, Revista de Economia Política, v. 21, n. 2 (82), abril-junho 2001.

OLIVEIRA, R. E. O. Avaliação de impacto do Programa de Modernização Tributária e da Gestão dos Setores Sociais Básicos (PMAT) na arrecadação de ISSQN e IPTU dos municípios, no período de 1999 a 2011, Dissertação de Mestrado, 2015.

PAIM P. Salário Mínimo uma história de luta, Revista de Economia Política, v. 21, n. 2 (82), novembro 2005.

Pequenos negócios respondem por 82% das novas vagas nos últimos meses. SEBRAE. Disponível em: https://www.sebrae.com.br/sites/PortalSebrae/ufs/sc/noticias/pequenos-negocios-respondem-

por-82-das-novas-vagas-nos-ultimos-meses,caaa6ddceeca6610VgnVCM1000004c00210aRCRD?codTema=2&origem=tema

SAEZ, E. Do Taxpayers Bunch at Kink Points?, American Economic Journal: Economic Policy 2, 180-212, 2010.

SCHWARTZ, J.; ANDRES, L.; DRAGOIU, G. Crisis in LAC: Infrastructure Investment, Employment and the Expectations of Stimulus, The LCSSD Occasional Papers Series, 2009.

SIMÕES, I. S.P. Apropriação de Transferências Intergovernamentais pela Burocracia: Um Estudo para os Municípios Brasileiros, Dissertação de Mestrado, 2014.

STEWART M. D. The Impact of the Introduction of the UK Minimum Wage on the Employment Probabilities of Low Wage Workers, Warwick Economic Research Papers, No. 630, Jan 2002.

Stata Treatment Effects Reference Manual: Potential Outcomes/Counterfactual Outcomes, Stata Press Publication, Release 13, 2013.

ULYSSEA G. Firms, Informality and Development: Theory and evidence from Brazil, Texto para discussão, No. 632, Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio), Departamento de Economia, Rio de Janeiro, 2014.

WEIL D. Public Enforcement/Private Monitoring: Evaluating a New Approach to Regulating the Minimum Wage, ILR Review , Vol. 58, No. 2, pp. 238-257, Jan 2005.