Ageing Poorly?: Accounting for the Decline in Earnings Inequality in Brazil, 1995-2012

Abstract

work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose, as provided below. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Following a peer review process, and with previous written consent by the Inter-American Development Bank (IDB), a revised version of this work may also be reproduced in any academic journal, including those indexed by the American Economic Association's EconLit, provided that the IDB is credited and that the author(s) receive no income from the publication. Therefore, the restriction to receive income from such publication shall only extend to the publication's author(s). With regard to such restriction, in case of any inconsistency between the Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives license and these statements, the latter shall prevail.Note that link provided above includes additional terms and conditions of the license. The Gini coefficient of labor earnings in Brazil fell by nearly a fifth between 1995 and 2012, from 0.50 to 0.41. The decline in earnings inequality was even larger by other measures, with the 90-10 percentile ratio falling by almost 40 percent. Although the conventional explanation of a falling education premium did play a role, an RIF regression-based decomposition analysis suggests that the decline in returns to potential experience was the main factor behind lower wage disparities during the period. Substantial reductions in the gender, race, informality and urbanrural wage gaps, conditional on human capital and institutional variables, also contributed to the decline. Although rising minimum wages were equalizing during 2003-2012, they had the opposite effects during 1995-2003, because of declining compliance. Over the entire period, the direct effect of minimum wages on inequality was muted. JEL classifications: D31, J31

Twenty Years of Wage Inequality in Latin America

“…See López-Calva and Lustig (2010), Tavares and Menezes-Filho (2011), Azevedo et al (2013), Rodríguez-Castelán et al (2016), Galiani et al (2017), and Fernández and Messina (2018).4 Campos-Vázquez, López-Calva, and Lustig (2016) document the decline in the experience premium among college workers in Mexico. Firpo,Ferreira, and Messina (2017) find that the decline in the experience premium was a key factor behind the decline in wage inequality in Brazil.…”

“…build counterfactual wage distributions using semiparametric methods to analyze the impact of the minimum wage on several inequality measuresin Argentina, Brazil, Chile, and Uruguay. They find that, except for Chile where the growth of the minimum wage was more moderate, the minimum wage was a significant driver of wage compression in the bottom half of the distribution Ferreira, Firpo, and Messina (2017). find that in Brazil increases in the minimum wage significantly helped reduce inequality during the boom years (2002-2012), but not during the preceding period of slow growth (…”

“…Detailed decompositions for Brazil suggest that the contribution of the experience premium may outweigh that of the schooling premium(Ferreira, Firpo, and Messina 2017). The overall effect of education on the reduction in inequality was further attenuated by pure compositional effects, which are still inequality increasing in Latin America (Tornarolli et al 2014; Ferreira, Firpo, and Messina 2017).…”

Top incomes’ impacts on inequality, growth, and social welfare: Combining surveys and income tax data in Brazil

“…It is also true that there was strong increase in the share of people up to 41 years old who file income tax returns, as well as a relative gain in the income of younger workers, concomitant with a reduction in the return on experience. According to Ferreira et al (2017), this was the main determinant of the decrease in labour earnings inequality between 1995 and 2012. These authors suggest two possible explanations for this phenomenon.…”

The evolution and determination of earnings inequality in post-apartheid South Africa

“…whereβ v t, j andβ v j are the coefficients of covariate j when the RIF is regressed on X in period t, and for the pooled periods respectively. As noted by Ferreira et al (2017), when the functional is the mean, then the RIF simply becomes Y , and the RIF regression is identical to the usual Oaxaca-Blinder decomposition.…”