A More Level Playing Field? Explaining the Decline in Earnings Inequality in Brazil, 1995-2012

IRIBA Working Paper: 12

30 Pages Posted: 19 Sep 2014

See all articles by Francisco H. G. Ferreira

Francisco H. G. Ferreira

World Bank - Development Research Group (DECRG)

Sergio Firpo

Insper

Julian Messina

World Bank

Date Written: September 18, 2014

Abstract

The Gini coefficient of labour earnings in Brazil fell by 20% between 1995 and 2012, from 0.5 to 0.4. The decline was even larger by other measures, with the 90-10 percentile ratio falling by almost 40%. Although the conventional explanation of falling returns to education did play a role, a RIF regression-based decomposition analysis suggests that substantial reductions in the gender, race and spatial wage gaps, conditional on human capital and institutional variables, explain the lion’s share of the decline in earnings inequality. Lower male, white, urban and Southeast wage premia, alongside lower formal-informal wage gaps, account for 6.3 of the ten Gini points difference between 1995 and 2012. Although rising minimum wages contributed to the decline during 2004-2012, they had no such effect during 1995-2002.

Keywords: Earnings inequality, Brazil, RIF Regressions

JEL Classification: D31, J31

Suggested Citation

Ferreira, Francisco H. G. and Firpo, Sergio and Messina, Julián, A More Level Playing Field? Explaining the Decline in Earnings Inequality in Brazil, 1995-2012 (September 18, 2014). IRIBA Working Paper: 12. Available at SSRN: https://ssrn.com/abstract=2497969 or http://dx.doi.org/10.2139/ssrn.2497969

Francisco H. G. Ferreira (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-4382 (Phone)

Sergio Firpo

Insper ( email )

R Quata 300
Sao Paulo, 04542-030
Brazil

HOME PAGE: http://https://sites.google.com/site/sergiopfirpo/

Julián Messina

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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