IMF Working Papers Volume 2017 Issue 278: Firms and the Decline in Earnings Inequality in Brazil (2017)

Firms and the Decline in Earnings Inequality in Brazil

Author:

Mr. Jorge A Alvarez

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https://isni.org/isni/0000000404811396 International Monetary Fund

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Felipe Benguria

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Niklas Engbom

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Christian Moser

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Series:: IMF Working Papers

Volume/Issue:: Volume 2017: Issue 278

Publication Date:: 14 Dec 2017

DOI:: https://doi.org/10.5089/9781484333037.001

ISBN:: 9781484333037

ISSN:: 1018-5941

Pages:: 59

Keywords:: WP; firm effect; firm size; mining firm; pay compression; Earnings Inequality; Linked Employer-Employee Data; Firm and Worker Heterogeneity; Productivity; firm pay policy; productivity shock; characteristics data; inequality trend; firm component; Wages; Income inequality; Aging

Legal-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.

Series:: IMF Working Papers

Volume/Issue:: Volume 2017: Issue 278

Language:: English

Publication Date:: 14 Dec 2017

DOI:: https://doi.org/10.5089/9781484333037.001

ISBN:: 9781484333037

ISSN:: 1018-5941

Pages:: 59

Keywords:: WP; firm effect; firm size; mining firm; pay compression; Earnings Inequality; Linked Employer-Employee Data; Firm and Worker Heterogeneity; Productivity; firm pay policy; productivity shock; characteristics data; inequality trend; firm component; Wages; Income inequality; Aging

Legal-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.

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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.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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