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Firms and the Decline in Earnings Inequality in Brazil

Author

Listed:
  • Jorge Alvarez
  • Felipe Benguria
  • Niklas Engbom
  • Christian Moser

Abstract

We document a large decrease in earnings inequality in Brazil between 1996 and 2012. Using administrative linked employer-employee data, we fit high-dimensional worker and firm fixed-effects models to understand the sources of this decrease. Firm effects account for 40 percent of the total decrease and worker effects for 29 percent. Changes in observable worker and firm characteristics contributed little to these trends. Instead, the decrease is primarily due to a compression of returns to these characteristics, particularly a declining firm productivity-pay premium. Our results shed light on potential drivers of earnings inequality dynamics.

Suggested Citation

  • Jorge Alvarez & Felipe Benguria & Niklas Engbom & Christian Moser, 2018. "Firms and the Decline in Earnings Inequality in Brazil," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(1), pages 149-189, January.
  • Handle: RePEc:aea:aejmac:v:10:y:2018:i:1:p:149-89
    Note: DOI: 10.1257/mac.20150355
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    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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