Firms and the Decline in Earnings Inequality in Brazil

60 Pages Posted: 18 Jan 2018

See all articles by Jorge Alvarez

Jorge Alvarez

International Monetary Fund (IMF)

Felipe Benguria

University of Kentucky - Gatton College of Business and Economics

Niklas Engbom

New York University (NYU); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Christian Moser

Columbia University; Federal Reserve Bank of Minneapolis; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2017

Abstract

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 for40 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 isprimarily 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.

Keywords: Brazil, Western Hemisphere, Earnings Inequality, Linked Employer-Employee Data, Firm and Worker Heterogeneity, Productivity, Firm Behavior: Empirical Analysis

JEL Classification: D22, E24, J31

Suggested Citation

Alvarez, Jorge and Benguria, Felipe and Engbom, Niklas and Moser, Christian, Firms and the Decline in Earnings Inequality in Brazil (December 2017). IMF Working Paper No. 17/278, Available at SSRN: https://ssrn.com/abstract=3104549

Jorge Alvarez (Contact Author)

International Monetary Fund (IMF) ( email )

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Felipe Benguria

University of Kentucky - Gatton College of Business and Economics ( email )

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Niklas Engbom

New York University (NYU) ( email )

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Christian Moser

Columbia University ( email )

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