Sergio Firpo and Alysson Portella. Decline in Wage Inequality in Brazil: A Survey relative the median wage that it barely affects the wage distribution, since most of the population makes more than the minimum wage. Brazil is an intermediary case in which we observe a large hike in the distribution of wages around the minimum wage, which demonstrates its importance in determining the wage distribution.

With respect to inequality, most studies in the previous decade find a negative relationship between increases in the minimum wage and inequality. For the period between 1981 and 1999, Menezes-Filho and Rodrigues (2009) use the semiparametric approach of DiNardo et al. (1996) and find that decreases in the real minimum wage during the period were related to increases in inequality. Covering a period of real increases in the minimum wage, Firpo and Reis (2007) find that they were associated with lower wage inequality between 2001-2005. Neumark et al. (2006) arrive at a different conclusion for the period between 1996 and 2001. They use a measure of bindingness to assess the impact of the minimum wage on the distribution of family income. The minimum wage is related to small increases in wages for the bottom of the distribution only in the short-run, that is, when they consider the contemporaneous share of earners below the minimum wage. However, when they consider the effects of this share in previous quarters, i.e., long-run effects, it becomes negative.

As pointed out by Saltiel and Urz ́ua (2018), the effects of the minimum wage may depend on the macroeconomic situation, with increases being beneficial only when a growing economy can support them. Ferreira et al. (2017) provide evidence suggesting this mechanism. They show that raises in the minimum wage increased inequality in the period between 1995 and 2002, marked by smaller growth and higher unemployment, while they find the opposite effect between 2003 and 2012. Using data from the Brazilian formal sector, Engbom and Moser (2018) and Haanwinckel (2018)<sup>19</sup> take a more structural approach and find that minimum wage increases contributed considerably to reductions in inequality between 1996 and 2012, estimating that 60% of the wage inequality reduction during the period was the direct or indirect consequence of minimum wage increases. In both models, the minimum wage can have important spillover effects, not only raising the wages of those directly affected by them, but also on percentiles as high as the 80th. In Engbom and Moser (2018), these effects on higher percentiles of the distribution happen because firms must keep up their wages’ rank with respect to the wages of competing firms. As some firms have to adjust their wages due to minimum wage increases, so must other firms if they want to attract the same type of workers. Therefore, minimum wage increases spill over to higher-paying firms.<sup>20</sup> Haanwinckel (2018) finds spillovers up to the

> 19For Haanwinckel (2018) the period of analysis starts in 1998 and only for the Brazilian state of Rio Grande do Sul.

> 20Such effect could also be the result of wages being indexed on the minimum wage. However, we do not have information on this matter. We thank Liliana Sousa for this point.

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