Two facts have characterized the evolution of the informal sector in Brazil during the last two decades: the increase in the proportion of non-registered workers and the diminishing wage gap between non-registered and registered workers. In this paper, we document both the increase of the informal sector and the fall in the wage gap in Brazil. Besides, we investigate which factors were responsible for the fall in the wage gap and how this reduction has contributed to reduce wage inequality between 1981 and 1999. Among our findings, we would highlight: 1) the coincidence between these two movements and the market-oriented reforms of the early 1990's; 2) that the fall in the formal/informal wage gap has substantially contributed to the decrease in wage inequality. After education, the fall in the wage premium due to the possession of a work-card was the main responsible for bringing down wage inequality. Why and how it happened is an open debate. We speculate that the trade liberalization process of the early 1990's and the increasing indexation of informal sector wages to the minimum wage may be behind these phenomena.
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Length: Date of creation: 2004 Date of revision: Handle: RePEc:anp:en2004:142
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Find related papers by JEL classification: J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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