Firms and the Decline in Earnings Inequality in Brazil

By Jorge A Alvarez, Felipe Benguria, Niklas Engbom, Christian Moser

December 14, 2017

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Jorge A Alvarez, Felipe Benguria, Niklas Engbom, and Christian Moser. Firms and the Decline in Earnings Inequality in Brazil, (USA: International Monetary Fund, 2017) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We document a large decrease in earnings inequality in Brazil between 1996 and 2012. Using administrative linked employer-employee data, we fit high-dimensional worker and firm fixed effects models to understand the sources of this decrease. Firm effects account for 40 percent of the total decrease and worker effects for 29 percent. Changes in observable worker and firm characteristics contributed little to these trends. Instead, the decrease is primarily due to a compression of returns to these characteristics, particularly a declining firm productivity pay premium. Our results shed light on potential drivers of earnings inequality dynamics.

Subject: Aging, Education, Income inequality, Labor, National accounts, Population and demographics, Wages

Keywords: Aging, Characteristics data, Earnings Inequality, Firm and Worker Heterogeneity, Firm component, Firm effect, Firm pay policy, Firm size, Income inequality, Inequality trend, Linked Employer-Employee Data, Mining firm, Pay compression, Productivity, Productivity shock, Wages, WP

Publication Details

Pages:

59
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/278
Stock No:

WPIEA2017278
ISBN:

9781484333037
ISSN:

1018-5941

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