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Economic Complexity and Inequality: Does Productive Structure Affect Regional Wage Differentials in Brazil?

Author

Listed:
  • Margarida Bandeira Morais
  • J. Swart
  • J.A. Jordaan

Abstract

Brazil is an upper middle income economy, with a GDP per capita of close to 12,000 (constant) dollars in 2014. Nonetheless, Brazil has a significant amount of people living under poverty. 7.6% of the population was poor in 2014 (Poverty headcount ratio at $3.10 a day, 2011 PPP), making Brazil one of the most unequal countries in the world. Concomitantly, Brazil's different regions and states are highly heterogeneous with respect to income levels, inequality, and prevalence of poverty. Moreover, in the last past decades, the dispersion of inequality between states has increased. This paper shows that Brazilian states are also heterogenous in terms of economic complexity; and analyzes how economic complexity affects income inequality. To test the relationship between economic complexity and income inequality we employ panel data analysis for the 27 Brazilian states over the period 2002-2014. Our main proposition is that economic complexity affects regional wage differentials in a nonlinear way. Our findings confirm this proposition and point to an inverted U-shaped relationship, whereby higher economic complexity is initially associated with higher, and subsequently lower, inequality levels.

Suggested Citation

  • Margarida Bandeira Morais & J. Swart & J.A. Jordaan, 2018. "Economic Complexity and Inequality: Does Productive Structure Affect Regional Wage Differentials in Brazil?," Working Papers 18-11, Utrecht School of Economics.
    • Handle: RePEc:use:tkiwps:1811
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    References listed on IDEAS

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    Cited by:

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    2. Juan Antonio González Sierra & Carla Carolina Pérez Hernández & Jessica Mendoza Moheno, 2023. "Inclusión financiera y complejidad económica en México," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 18(2), pages 1-25, Abril - J.
    3. Chien-Chiang Lee & En-Ze Wang, 2021. "Economic Complexity and Income Inequality: Does Country Risk Matter?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 154(1), pages 35-60, February.
    4. Rui Xue & KeYu Li & FeiFei Wang & Claude Baron, 2024. "Research Progress and Hot-spot Analysis of The Economic Complexity Research Based on CiteSpace," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 14(1), pages 1-10.
    5. Lapatinas, Athanasios & Litina, Anastasia & Zanaj, Skerdilajda, 2020. "Environmental Culture and Economic Complexity," MPRA Paper 105067, University Library of Munich, Germany.
    6. Hidalgo, César A., 2023. "The policy implications of economic complexity," Research Policy, Elsevier, vol. 52(9).
    7. Bryan Rivera & Marcelo Leon & Gino Cornejo & Hector Florez, 2023. "Analysis of the Effect of Human Capital, Institutionality and Globalization on Economic Complexity: Comparison between Latin America and Countries with Greater Economic Diversification," Economies, MDPI, vol. 11(8), pages 1-16, July.
    8. Arif, Imran, 2021. "Productive knowledge, economic sophistication, and labor share," World Development, Elsevier, vol. 139(C).

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    Keywords

    Income inequality; economic complexity; productive structure; Brazil; Kuznets curve; wage differentials; Gini; Theil; economic development; Brazilian states; panel data; ECI;
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