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Inter-regional Wage Differentials with Individual Heterogeneity: Evidence from Brazil

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  • Ricardo S. Freguglia
  • Naercio A. Menezes Filho

Abstract

This paper uses administrative data to follow Brazilian workers over time and examine what happens to the inter-regional wage differentials after controlling for unmeasured workers’ characteristics that are fixed over time. Since the data allow us to track the same workers over the years, we are in the unusual position of obtaining the individual wages before and after the migration process. As a significant share of workers changed States in the sample period, it is possible to examine to what extent the wage differentials reflect the concentration of high skilled individuals in some States. The results show that the overall wage variability across States drops to almost one third of its original value and the ranking of the State effects is significantly altered after we take into account the workers’ fixed effects. A great deal of the inter-regional differentials, therefore, reflects differences in the average ability of workers across States.

Suggested Citation

  • Ricardo S. Freguglia & Naercio A. Menezes Filho, 2011. "Inter-regional Wage Differentials with Individual Heterogeneity: Evidence from Brazil," Business and Economics Working Papers 133, Unidade de Negocios e Economia, Insper.
    • Handle: RePEc:aap:wpaper:133
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    Cited by:

    1. William R. DiPietro, 2015. "Wages And Corporate Dominance," Ekonomika, Journal for Economic Theory and Practice and Social Issues 2015-01, „Ekonomika“ Society of Economists, Niš (Serbia).
    2. Diana Lúcia Gonzaga da Silva & Carlos Roberto Azzoni, 2016. "Location and wages: the contribution of firm and worker effects in Brazil," Working Papers, Department of Economics 2016_41, University of São Paulo (FEA-USP).
    3. Ana Maria Barufi, 2014. "Agglomeration Economies in the Brazilian Formal Labor Market," TD NEREUS 3-2014, Núcleo de Economia Regional e Urbana da Universidade de São Paulo (NEREUS).
    4. Chauvin, Juan Pablo & Glaeser, Edward & Ma, Yueran & Tobio, Kristina, 2017. "What is different about urbanization in rich and poor countries? Cities in Brazil, China, India and the United States," Journal of Urban Economics, Elsevier, vol. 98(C), pages 17-49.
    5. Ana Maria Bonomi Barufi & Eduardo Amaral Haddad & Peter Nijkamp, 2016. "Industrial scope of agglomeration economies in Brazil," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(3), pages 707-755, May.
    6. DiPietro, William R., 2015. "Wages And Corporate Dominance," Ekonomika, Journal for Economic Theory and Practice and Social Issues, Society of Economists Ekonomika, Nis, Serbia, vol. 61(01), pages 1-8, March.
    7. GRIES, Thomas & PALNAU, Irene, 2016. "Distress Beyond Poverty: Spatial Patterns And Geographic Aspects Of Vulnerability In Brazil," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 16(2), pages 53-70.
    8. Vera A. Adamchik & Thomas J. Hyclak, 2013. "The Evolution Of Regional Wage Differentials In A Transition Economy: Evidence From Poland," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 7(5), pages 1-13.
    9. Ana Maria Bonomi Barufi, 2014. "Regional labor markets in Brazil: the role of skills and agglomeration economies," Working Papers, Department of Economics 2014_18, University of São Paulo (FEA-USP).

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    More about this item

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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