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Agglomeration Economies in the Brazilian Formal Labor Market

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  • Barufi, Ana Maria

Abstract

This paper aims to discuss how agglomerations economies are present in the equilibrium outcomes of the Brazilian formal labor market. We make use of an individual-firm panel database from the Ministry of Labor (RAIS) with information for six years (2003, 2004, 2005, 2008, 2009 and 2012). With the panel data setting, it is not only possible to account for individual unobserved characteristics constant in time, but also for sector and area effects. Moreover, by identifying skills according to the occupational position of the individuals in each firm, it is possible to control for the proximity to different skill levels (in the sector and municipality) to account for different levels of production knowledge externalities. Individual fixed effects control the potential endogeneity of the labor quality. In the case of labor quantity endogeneity, even if there is no consensus of how to best control for it, instruments based on long time lags are considered. The results show that there is a positive and significant effect of density over wages (Urban Economics literature), even when controlling for other relevant characteristics. Moreover, a measure of market potential, related to the New Economic Geography literature, does not capture this positive relationship with wages in the same way, changing sign in a specific setting. Finally, considering a quantile regression approach, there is an indication that agglomeration economies reinforce wage inequality, with a higher effect for the upper part of the wage distribution.

Suggested Citation

  • Barufi, Ana Maria, 2014. "Agglomeration Economies in the Brazilian Formal Labor Market," TD NEREUS 3-2014, Núcleo de Economia Regional e Urbana da Universidade de São Paulo (NEREUS).
    • Handle: RePEc:ris:nereus:2014_003
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    References listed on IDEAS

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    2. Long Thanh Giang & Cuong Viet Nguyen & Tuyen Quang Tran & Vu Thieu, 2017. "Does Firm Agglomeration Matter to Labor and Education of Local Children? Evidence in Vietnam," Child Indicators Research, Springer;The International Society of Child Indicators (ISCI), vol. 10(4), pages 1015-1041, December.

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    More about this item

    Keywords

    agglomeration economies; panel data; quantile regression;
    All these keywords.

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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