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Wages and Profits in Manufacturing Firms: Matched-Panel Evidence from Brazil

Author

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  • Pedro S. Martins

    (School of Business and Management, Queen Mary, University of London, United Kingdom)

  • Luiz A. Esteves

    (Department of Economics & Graduate Program of Public Policy, UFPR, Brazil)

Abstract

We provide evidence about the determinants of the wage structures of developing countries by examining the case of Brazil. Our specific question is whether Brazil’s dramatic income and wage differentials can be explained by the division of rents between firms and their employees, unlike in competitive labour markets. Using detailed individual-level matched panel data, covering a large share of manufacturing firms and more than 30 million workers between 1997 and 2002, we consider the endogeneity of profits, by adopting different measures of profits and different instruments and by controlling for spell fixed effects. Our results, robust to different specifications and tests,indicate no evidence of rent sharing. This conclusion contrasts with findings for most developed countries, even those with flexible labour markets. Possible explanations for the lack of rent sharing include the weakness of labour-market institutions, the high levelsof worker turnover and the macroeconomic instability faced by the country

Suggested Citation

  • Pedro S. Martins & Luiz A. Esteves, 2012. "Wages and Profits in Manufacturing Firms: Matched-Panel Evidence from Brazil," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 13(3b), pages 815-841.
  • Handle: RePEc:anp:econom:v:13:y:2012:i:3b:815_841
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    References listed on IDEAS

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    More about this item

    Keywords

    Wage Bargaining; Instrumental Variables; Matched Employer-Employee Data; Developing Countries;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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