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

Ferreira, Francisco H G, Firpo, Sergio P and Messina, Julián (2021) Labor market experience and falling earnings inequality in Brazil: 1995–2012. World Bank Economic Review. ISSN 0258-6770

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Identification Number: 10.1093/wber/lhab005

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.

Item Type: Article
Official URL: https://academic.oup.com/wber
Additional Information: © 2021 The Authors
Divisions: International Inequalities Institute
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
JEL classification: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
Date Deposited: 13 May 2021 13:36
Last Modified: 19 May 2021 09:03
URI: http://eprints.lse.ac.uk/id/eprint/110471

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