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Cost of Living and Wages in the Metropolitans Regions in Brazil

Author

Listed:
  • Alexandre de Almeida
  • Humberto Spolador
  • Carlos Azzoni

Abstract

This paper analyses the relationship between household cost of living and wages in the Brazilian metropolitan regions. The country's economic growth in the last decade contributed significantly to structural economic changes at the regional level, in terms of employment, population growth and income at PPP levels. With low inflation and modest economic growth, families have been able to adjust their domestic budget on the long run, improving their welfare. In urban areas, poverty reduction has been significant and has increased the consumption of families, with changes in the basket of goods and services, as well in relative prices. Based on recent estimations of cost of living in the Brazilian metropolitan regions (Almeida and Azzoni, 2013), we tested if the elasticity between wages and living cost is unitary. In other words, if workers who live in the most expensive regions receive a full compensation through wages for living costs differences. We used micro data from the Household Expenditure Surveys in the period 1996-2009. Our preliminary results suggest that the price index elasticity in response to wage levels is above the unity. This result is in accordance to the literature, but we found higher elasticities. The elasticity for housing expenditures is higher than for food and transportation, indicating that housing costs are more important in defining welfare levels.

Suggested Citation

  • Alexandre de Almeida & Humberto Spolador & Carlos Azzoni, 2014. "Cost of Living and Wages in the Metropolitans Regions in Brazil," ERSA conference papers ersa14p129, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa14p129
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    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa14/e140826aFinal00129.pdf
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    References listed on IDEAS

    as
    1. Winters, John V., 2009. "Wages and prices: Are workers fully compensated for cost of living differences?," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 632-643, September.
    2. Maria Cristina Galvão & Alexandre Nunes De Almeida & Humberto F. S. Spolador & Carlos R. Azzoni, 2016. "Custo De Vida E Salários Para As Regiões Metropolitanas Brasileiras," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 175, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    3. Tatiane Menezes & R. Silveira-Neto & Carlos Azzoni, 2012. "Demography and evolution of regional inequality," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(3), pages 643-655, December.
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    More about this item

    Keywords

    Regional economic growth; living cost; wages; Brazil;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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