IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/29696.html

Earnings Inequality and Dynamics in the Presence of Informality: The Case of Brazil

Author

Listed:
  • Niklas Engbom
  • Gustavo Gonzaga
  • Christian Moser
  • Roberta Olivieri

Abstract

Using rich administrative and household survey data spanning 34 years from 1985 to 2018, we document a series of new facts on earnings inequality and dynamics in a developing country with a large informal sector: Brazil. Since the mid-1990s, both inequality and volatility of earnings have declined significantly in Brazil’s formal sector. Higher-order moments of the distribution of earnings changes show cyclical movements in Brazil that are similar to those in developed countries like the US. Relative to the formal sector, the informal sector is associated with a significant earnings penalty and higher earnings volatility for identical workers. Earnings changes of workers who switch from formal to informal (from informal to formal) employment are relatively negative (positive) and large in magnitude, dispersed, negatively (positively) skewed, and less leptokurtic. Our results suggest that informal employment is an imperfect insurance mechanism.

Suggested Citation

  • Niklas Engbom & Gustavo Gonzaga & Christian Moser & Roberta Olivieri, 2022. "Earnings Inequality and Dynamics in the Presence of Informality: The Case of Brazil," NBER Working Papers 29696, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29696
    Note: EFG
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w29696.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Patrick Wagner & Damian Raess, 2023. "South to north investment linkages and decent work in Brazil," LABOUR, CEIS, vol. 37(1), pages 122-159, March.
    2. Andrés Blanco & Bernardo Diaz de Astarloa & Andres Drenik & Christian Moser & Danilo R. Trupkin, 2022. "The evolution of the earnings distribution in a volatile economy: Evidence from Argentina," Quantitative Economics, Econometric Society, vol. 13(4), pages 1361-1403, November.
    3. Tomás R. Martinez & Antonio Martins-Neto & Ursula Mello, 2024. "Gender and Top Lifetime Earnings Inequality: Ten New Facts from Brazil," Business and Economics Working Papers 242, Unidade de Negocios e Economia, Insper.
    4. Luduvice, André Victor D. & Martinez, Tomás R. & Sollaci, Alexandre B., 2024. "Minimum Wage, Business Dynamism, and the Life Cycle of Firms," IDB Publications (Working Papers) 13444, Inter-American Development Bank.
    5. Manuel Fern√°ndez & Gabriela Serrano, 2022. "New Perspectives on Inequality in Latin America," Documentos CEDE 20295, Universidad de los Andes, Facultad de Economía, CEDE.
    6. Puggioni Daniela & Calderón Mariana & Cebreros Alfonso & Fernández León & Inguanzo José A. & Jaume David, 2022. "Inequality, Income Dynamics, and Transitions of Mexican Workers," Working Papers 2022-14, Banco de México.
    7. Søren Leth‐Petersen & Johan Sæverud, 2022. "Inequality and dynamics of earnings and disposable income in Denmark 1987–2016," Quantitative Economics, Econometric Society, vol. 13(4), pages 1493-1526, November.
    8. Fatih Guvenen & Luigi Pistaferri & Giovanni L. Violante, 2022. "Global trends in income inequality and income dynamics: New insights from GRID," Quantitative Economics, Econometric Society, vol. 13(4), pages 1321-1360, November.
    9. Elin Halvorsen & Serdar Ozkan & Sergio Salgado, 2022. "Earnings dynamics and its intergenerational transmission: Evidence from Norway," Quantitative Economics, Econometric Society, vol. 13(4), pages 1707-1746, November.
    10. Amaral, Ernesto F.L. & Queiroz, Bernardo L. & Haussmann Rodarte Faustino, Samantha & Quaresma, Guilherme, 2025. "Individual earnings differentials by education level in Brazil: the greater inequality of the informal sector," Notas de Población, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), October.
    11. Jose Garcia-Louzao & Linas Tarasonis, 2025. "Earnings Inequality and Risk over Two Decades of Economic Development in Lithuania," GRAPE Working Papers 105, GRAPE Group for Research in Applied Economics.
    12. Galego Mendes,Arthur & Miyamoto,Wataru & Nguyen,Thuy Lan & Pennings,Steven Michael & Feler,Leo, 2023. "The Macroeconomic Effects of Cash Transfers : Evidence from Brazil," Policy Research Working Paper Series 10652, The World Bank.
    13. Luis Beccaria & Nahuel Mura & Sonia Filipetto, 2024. "Transitions from the formal to the informal sector in Latin America," Revista de Economía Laboral - Spanish Journal of Labour Economics, Asociación Española de Economía Laboral - AEET, vol. 21, pages 35-72.
    14. Mark Bils & Bariş Kaymak & Kai-Jie Wu, 2025. "Robinson Meets Roy: Monopsony Power and Comparative Advantage," NBER Working Papers 34165, National Bureau of Economic Research, Inc.
    15. Leo Feler & Arthur Mendes & Wataru Miyamoto & Thuy Lan Nguyen & Steven Pennings, 2023. "The Macroeconomic Effects of Cash Transfers: Evidence from Brazil," Working Paper Series 2024-02, Federal Reserve Bank of San Francisco.
    16. Morchio, Iacopo & Moser, Christian, 2018. "The Gender Pay Gap: Micro Sources and Macro Consequences," MPRA Paper 99276, University Library of Munich, Germany, revised 24 Mar 2020.
    17. Finamor, Lucas, 2024. "Labor Market Informality, Risk, and Insurance," MPRA Paper 121662, University Library of Munich, Germany.
    18. Daniela Puggioni & Mariana Calderón & Alfonso Cebreros Zurita & León Fernández Bujanda & José Antonio Inguanzo González & David Jaume, 2022. "Inequality, income dynamics, and worker transitions: The case of Mexico," Quantitative Economics, Econometric Society, vol. 13(4), pages 1669-1705, November.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:29696. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.