Skill Premium, Labor Supply and Changes in the Structure of Wages in Latin America

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 opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.http://www.iadb.org 2017 Abstract * Earnings inequality declined rapidly in Argentina, Brazil and Chile during the 2000s. A reduction in the experience premium is a fundamental driver of declines in upper-tail (90/50) inequality, while a decline in the education premium is the primary determinant of the evolution of lower-tail (50/10) inequality. Relative labor supply is important for explaining changes in the skill premiums. Relative demand trends favored high-skilled workers during the 1990s, shifting in favor of low-skilled workers during the 2000s. Changes in the minimum wage, and more importantly, commodity-led terms of trade improvements are key factors behind these relative skill demand trends.JEL classifications: J20, J31

Decline In Wage Inequality In Brazil : A Survey

“…The results of Ferreira et al (2017) are similar to the ones reported by Fernández and Messina (2018) and Alvarez et al (2018). The first conducts a similar decomposition as Ferreira et al (2017), but uses a more restricted set of covariates.…”

“…are not yet clear. Although strong evidence suggests that changes in the relative supply of skilled labor explain almost all the reduction in the skill premium, changes in the supply of potential experience explain only a limited amount of the variation in the experience premium, meaning that changes in demand must have played a role (Fernández and Messina, 2018). As for now, the literature has not investigated possible changes in the economy that favored younger workers in the period.…”

Learning Better: Public Policy for Skills Development

“…The model uses the same elasticities in all three countries. Source: Fernández and Messina (2017). The dark orange line shows the observed evolution of the skill premium.…”

“…Certainly, supply changes have been an important force behind recent changes in the schooling premium in Latin America and the Caribbean, but they are not the sole factor (Messina and Silva, 2016). Fernández and Messina (2017) study the supply effects of education and experience in the schooling and experience premiums of Argentina, Brazil and Chile. They consider two types of workers: skilled and unskilled.…”

“…Minimum wage hikes may push up the wages of low skill jobs. In Argentina and Brazil, the minimum wage played a role in the decline of the skill premium, but supply forces remain important (Fernández and Messina, 2017). Moreover, not all countries raised the minimum wage during the 2000s while the slide of the schooling premium was widespread across the region.…”