Rural-Urban Migration and the Skill Wage Premium in Brazil: 1980-2000

37 Pages Posted: 13 Apr 2014

See all articles by Tiago Freire

Tiago Freire

University of Canberra; Roberts Capital Advisors LLC

Date Written: April 10, 2014

Abstract

We use a production function approach to determine the impact of increased labour supply of different skill level on the skill wage premium. In particular, we use data the Brazilian Population Census for 1980 to 2000, for which we have consistent data on cities, to estimate the elasticity of substitution between high and low-skill workers. Unlike the international migration literature, we can estimate the response of out migration from rural areas in response to exogenous shocks, such as rainfall shocks and changes in transportation costs, and use the predicted value from these shocks to construct our instrumental variable. We nd an elasticity of substitution between high and low-skill workers of 0.56, much lower than what has been found in the international migration literature. Our simulations show that migration between 1991 and 2000 had only a small impact of the skill wage gap, a 1.1% decrease in the wage gap between high and low-skill workers in Brazil, explaining only 5% of the changes in relative wages between high and low-skill workers seen in the data during this time period. Though this impact is small is it is 2.5 times larger than what we would have found using the elasticity of substitution between high and low-skill of developed countries.

Keywords: Labor Markets, Labor Migration, Rural Urban, Wages

JEL Classification: J31, J61, O15, O18, R12

Suggested Citation

Miguel de Abreu Freire, Tiago Alexandre, Rural-Urban Migration and the Skill Wage Premium in Brazil: 1980-2000 (April 10, 2014). Available at SSRN: https://ssrn.com/abstract=2423304 or http://dx.doi.org/10.2139/ssrn.2423304

Tiago Alexandre Miguel de Abreu Freire (Contact Author)

University of Canberra ( email )

Canberra, Australian Capital Territory 2601
Australia

HOME PAGE: http://Www.tiagofreire.com

Roberts Capital Advisors LLC ( email )

1350 Avenues of the Americas, Fl2
New York, NY 10019
United States

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