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Demographic Change and the Structure of Wages: A Demand-Theoretic Analysis for Brazil

  • Ernesto F. L. Amaral
  • Daniel S. Hamermesh
  • Joseph E. Potter
  • Eduardo L.G. Rios-Neto

With rapidly declining fertility and increased longevity the age structure of the labor force in developing countries has changed rapidly. Changing relative supply of workers by age group, and by educational attainment, can have profound effects on labor costs. Their impacts on earnings have been heavily studied in the United States but have received little attention in Asia and Latin America, where supply shocks are at least as large and have often proceeded less evenly across the economy. We use data on 502 local Brazilian labor markets from Censuses 1970-2000 to examine the extent of substitution among demographic groups as relative supply has changed. The results suggest that age-education groups are imperfect substitutes, so that larger age-education cohorts see depressed wage rates, particularly among more-educated groups. The extent of substitution has increased over time, so that the decreasing size of the least-skilled labor force today is barely raising its remaining members' wages.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13533.

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Date of creation: Oct 2007
Date of revision:
Publication status: published as Demographic Research, Volume 28 - Article 20 | Pages 581-612
Handle: RePEc:nbr:nberwo:13533
Note: LS
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  1. Richard B. Freeman, 1979. "The Effect of Demographic Factors on Age-Earnings Profiles," NBER Working Papers 0316, National Bureau of Economic Research, Inc.
  2. Jaime Saavedra-Chanduví & Máximo Torero, 2000. "Labor Market Reforms and Their Impact on Formal Labor Demand and Job Market Turnover: The Case of Peru," Research Department Publications 3095, Inter-American Development Bank, Research Department.
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  7. Gindling, T. H. & Robbins, Donald, 2001. "Patterns and Sources of Changing Wage Inequality in Chile and Costa Rica During Structural Adjustment," World Development, Elsevier, vol. 29(4), pages 725-745, April.
  8. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," NBER Working Papers 5956, National Bureau of Economic Research, Inc.
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  10. James H. Grant & Daniel S. Hamermesh, 1980. "Labor Market Competition among Youths, White Women, and Others," NBER Working Papers 0519, National Bureau of Economic Research, Inc.
  11. Joseph Potter & Carl Schmertmann & Suzana Cavenaghi, 2002. "Fertility and development: evidence from Brazil," Demography, Springer, vol. 39(4), pages 739-761, November.
  12. Welch, Finis, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S65-97, October.
  13. George J. Borjas & Richard B. Friedman & Lawrence F. Katz, 1997. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 1-90.
  14. Finis Welch, 1979. "Effects of Cohort Size on Earnings: The Baby Boom Babies' Financial Bust," UCLA Economics Working Papers 146, UCLA Department of Economics.
  15. Jaime Saavedra & Mhmo Torero, 2004. "Labor Market Reforms and Their Impact over Formal Labor Demand and Job Market Turnover. The Case of Peru," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 131-182 National Bureau of Economic Research, Inc.
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