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Is the Brazilian labor market granular?

Author

Listed:
  • Leon Esquierro

    (Federal University of Santa Catarina)

  • Sergio Da Silva

    (Federal University of Santa Catarina)

Abstract

This study explores the impact of large firms, often referred to as “big grains,” on hiring and firing cycles in the Brazilian labor market. We found strong support for the granular hypothesis. Our methodology involved analyzing the power-law distribution, granular residuals, and the granular size of the labor market. Key findings include the observation that firms exhibit a power-law distribution based on their workforce size, with large companies' idiosyncratic shocks significantly influencing hiring and firing cycles. In particular, the service sector plays a substantial role in explaining these cycles, while manufacturing has limited explanatory power. We determined that the granular size of the Brazilian labor market consists of 15 firms engaged in public services, and private companies have a relatively minor impact on hiring and firing cycles. The policy implication here is that addressing periods of high unemployment in Brazil may be more effectively achieved by investing in public services rather than providing fiscal stimulus for manufacturing. This study contributes to the global body of evidence on labor market granularity and is compared with the existing research focused on Germany. We find that the Brazilian labor market is less granular than the German one.

Suggested Citation

  • Leon Esquierro & Sergio Da Silva, 2024. "Is the Brazilian labor market granular?," Economics Bulletin, AccessEcon, vol. 44(2), pages 576-585.
    • Handle: RePEc:ebl:ecbull:eb-23-00477
    as

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    References listed on IDEAS

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    1. Giovanni Dosi & Mauro Napoletano & Andrea Roventini & Tania Treibich, 2019. "Debunking the granular origins of aggregate fluctuations: from real business cycles back to Keynes," Journal of Evolutionary Economics, Springer, vol. 29(1), pages 67-90, March.
    2. Murilo Silva & Sergio Da Silva, 2020. "The Brazilian granular business cycle," Economics Bulletin, AccessEcon, vol. 40(1), pages 463-472.
    3. Xavier Gabaix & Rustam Ibragimov, 2011. "Rank - 1 / 2: A Simple Way to Improve the OLS Estimation of Tail Exponents," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(1), pages 24-39, January.
    4. Xavier Gabaix, 2011. "The Granular Origins of Aggregate Fluctuations," Econometrica, Econometric Society, vol. 79(3), pages 733-772, May.
    5. Tim Kovalenko & Claus Schnabel & Heiko Stüber, 2022. "Is the German labour market granular?," Applied Economics Letters, Taylor & Francis Journals, vol. 29(1), pages 41-48, January.
    6. Davis, Steven J & Haltiwanger, John & Schuh, Scott, 1996. "Small Business and Job Creation: Dissecting the Myth and Reassessing the Facts," Small Business Economics, Springer, vol. 8(4), pages 297-315, August.
    7. repec:spo:wpmain:info:hdl:2441/1p3k1810c89k3b4gg6n2nuc0m4 is not listed on IDEAS
    8. Blanco-Arroyo, Omar & Ruiz-Buforn, Alba & Vidal-Tomás, David & Alfarano, Simone, 2018. "On the determination of the granular size of the economy," Economics Letters, Elsevier, vol. 173(C), pages 35-38.
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    JEL classification:

    • J4 - Labor and Demographic Economics - - Particular Labor Markets

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