New Evidence on the Wage Curve: Non-linearities, Urban Size, and Spatial Scale in Brazil

Ana Maria Bonomi Barufi, Eduardo Amaral Haddad () and Peter Nijkamp
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Eduardo Amaral Haddad: Departamento de Economia, Universidade de São Paulo

No 1-2017, TD NEREUS from Núcleo de Economia Regional e Urbana da Universidade de São Paulo (NEREUS)

Abstract: City size plays an important role in the relative bargaining power of workers and firms in labour markets. When analysing the relationship between local wages and the business cycle – wage flexibility, measured by the wage curve –, this influence appears to be higher in informal sectors in less densely populated areas in Brazil. Our study aims to shed new theoretical and empirical light on the importance of the wage curve, taking into account various specificities of developing economies. The applied modelling study in Brazil shows that wage flexibility is higher in less dense local labour markets and in the informal sector when compared to the formal sector. Furthermore, it is essential to control for unobserved local characteristics in order to obtain the ‘true’ elasticity of wages to local unemployment rates. Moreover, a significant part of the difference between the formal and the informal sectors originates from spatial effects.

Keywords: city size; labor markets; local wages; business cycle; Brazil (search for similar items in EconPapers)
JEL-codes: R10 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2017
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: NEW EVIDENCE ON THE WAGE CURVE: NON-LINEARITIES, URBAN SIZE, AND SPATIAL SCALE IN BRAZIL (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:nereus:2017_001

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