Earnings Inequality and Dynamics in the Presence of Informality: The Case of Brazil

55 Pages Posted: 18 Feb 2021 Last revised: 10 Mar 2021

See all articles by Niklas Engbom

Niklas Engbom

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

Gustavo Gonzaga

Pontifical Catholic University of Rio de Janeiro (PUC-Rio)

Christian Moser

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

Roberta Olivieri

Cornell University, Department of Economics, Students

Multiple version iconThere are 2 versions of this paper

Date Written: February 24, 2021

Abstract

Using rich administrative and household survey data, we document a series of new facts on earnings inequality and dynamics in a developing country with a large informal sector: Brazil. Since the mid-1990s, both inequality and volatility of earnings have declined significantly in Brazil's formal sector. Higher-order moments of the distribution of earnings innovations show cyclical movements in Brazil that are similar to those in developed countries like the US. Earnings mobility is comparatively high, especially at the bottom of the distribution. Compared with those in the formal sector, earnings in the informal sector are more volatile. Workers who switch between sectors experience earnings innovations that have a positive mean and are positively skewed when moving to the formal sector but have a negative mean and are negatively skewed when moving to the informal sector. Since the early 2000s, a secular shift of employment toward the less volatile formal sector has contributed to a decline in the economy-wide volatility of earnings.

Keywords: Earnings Inequality, Earnings Volatility, Earnings Mobility, Informality

JEL Classification: J31, J46, J62, D31, D33, E24, E26

Suggested Citation

Engbom, Niklas and Gonzaga, Gustavo and Moser, Christian and Olivieri, Roberta, Earnings Inequality and Dynamics in the Presence of Informality: The Case of Brazil (February 24, 2021). Available at SSRN: https://ssrn.com/abstract=3778408 or http://dx.doi.org/10.2139/ssrn.3778408

Niklas Engbom

New York University (NYU) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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National Bureau of Economic Research (NBER) ( email )

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Gustavo Gonzaga

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) ( email )

Brazil

Christian Moser (Contact Author)

Columbia University ( email )

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Federal Reserve Bank of Minneapolis ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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Roberta Olivieri

Cornell University, Department of Economics, Students ( email )

Ithaca, NY
United States

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