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Earnings Inequality in Brazil: Is it Permanent or Transitory?

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  • Santos, Antonio Loureiro
  • Souza, André Portela

Abstract

This paper seeks to analyze the dynamic behavior of prime-age male workers’ earnings inequality in the formal labor market of the State of S˜ao Paulo in the years 1990-1998. The aim is to fit an econometric model of unobserved earnings components into the empirical earnings variance-covariance structure in order to evaluate the relative magnitude of individual characteristics and earnings instability as factors behind overall inequality. The analysis is based on a panel dataset constructed from RAIS data (official formal labor market data); several different models are estimated and tested using minimum distance techniques. Our results show that (i) the relative magnitude of the earnings instability component of inequality is much smaller than the individual characteristics component, and (ii) the observed heterogeneity, as accounted by education and age, explains only a little part of the inequality derived from individual characteristics.

Suggested Citation

  • Santos, Antonio Loureiro & Souza, André Portela, 2007. "Earnings Inequality in Brazil: Is it Permanent or Transitory?," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 27(2), November.
    • Handle: RePEc:sbe:breart:v:27:y:2007:i:2:a:1528
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    6. Andre Portela Souza, 2002. "Wage Inequality Changes in Brazil: Market Forces, Macroeconomic Instability and Labor Market Institutions (1981-1997)," Vanderbilt University Department of Economics Working Papers 0215, Vanderbilt University Department of Economics.
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    Cited by:

    1. Scott Drewianka, 2010. "Cross‐Sectional Variation In Individuals' Earnings Instability," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(2), pages 291-326, June.
    2. Aedín Doris & Donal O’Neill & Olive Sweetman, 2013. "Identification of the covariance structure of earnings using the GMM estimator," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(3), pages 343-372, September.
    3. Ana Heloisa da Costa Lemos & Veranise Jacubowski Correia Dubeux & Mario Couto Soares Pinto, 2011. "Employability of young managers: a question of merit or aristocracy?," Brazilian Business Review, Fucape Business School, vol. 8(1), pages 93-113, January.

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