Labor market experience and falling earnings inequality in Brazil: 1995–2012

Francisco Ferreira, Sergio Firpo and Julian Messina

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The Gini coefficient of labor earnings in Brazil fell by nearly a fifth between 1995 and 2012, from 0.50 to 0.41. The decline in other measures of earnings inequality was even larger, with the 90-10 percentile ratio falling by almost 40 percent. Applying micro-econometric decomposition techniques, this study parses out the proximate determinants of this substantial reduction in earnings inequality. Although a falling education premium did play a role, in line with received wisdom, this study finds that a reduction in the returns to labor market experience was a much more important factor driving lower wage disparities. It accounted for 53 percent of the observed decline in the Gini index during the period. Reductions in horizontal inequalities – the gender, race, regional and urban-rural wage gaps, conditional on human capital and institutional variables – also contributed. Two main factors operated against the decline: a greater disparity in wage premia to different sectors of economic activity, and the “paradox of progress”: the mechanical inequality-increasing effect of a more educated labor force when returns to education are convex.

Keywords: earnings inequality; Brazil; returns to experience (search for similar items in EconPapers)
JEL-codes: D31 J31 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2022-02-02
New Economics Papers: this item is included in nep-isf, nep-lam and nep-ltv
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Citations: View citations in EconPapers (1)

Published in World Bank Economic Review, 2, February, 2022, 36(1), pp. 37-67. ISSN: 0258-6770

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Related works:
Journal Article: Labor Market Experience and Falling Earnings Inequality in Brazil: 1995–2012 (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:110471

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