Jorge Alvarez, Felipe Benguria, Niklas Engbom, and Christian Moser
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
Jorge Alvarez, Felipe Benguria, Niklas Engbom, Christian Moser, and Mr. Chris Papageorgiou
Since the mid-1990s, Brazil has experienced a large reduction in earningsinequality resembling the experience of other Latin American economies during this period. This decrease in earningsinequality stands in stark contrast to that of the US and many developed countries, which saw inequality steadily increasing over the past two decades. 1 This paper studies the sources of this decrease.
To this end, we exploit a large administrative linked employer-employee dataset containing information on hundreds of millions of job spells between