Abstract
This paper estimates the short-run impact of wage indexation on monthly nominal-wage changes in two Brazilian manufacturing industries between 1966 and 1976. A policy and market-force wage determination model is estimated. The model includes variables that capture the effects of the annual collective wage adjustment, the regional minimum wage, demand, and inflation. Monthly data allow identification of the month of impact of the indexation coefficients. Results suggest that indexation does not fully set wages and support the hypothesis that wages rise between formal adjustments in response to economic forces. Intra-period wage drift is possible because of turnover and recontracting in the labor market.
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