Spatial Dynamics of Labor Markets in Brazil

40 Pages Posted: 10 Nov 2005

See all articles by Kenneth M. Chomitz

Kenneth M. Chomitz

World Bank, Independent Evaluation Group

Daniel Da Mata

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics

João Carlos Ramos Magalhaes

Institute of Applied Economic Research (IPEA)

Alexandre Carvalho

Institute of Applied Economic Research (IPEA)

Date Written: October 2005

Abstract

There was substantial spatial variation in labor market outcomes in Brazil over the 1990s. In 2000, about one-fifth of workers lived in apparently economically stagnant municipios where real wages declined but employment increased faster than the national population growth rate. More than one-third lived in apparently dynamic municipios, experiencing both real wage growth and faster-than-average employment growth. These areas absorbed more than half of net employment growth over the period. To elucidate this spatial variation, the authors estimate spatial labor supply and demand equations describing wage and employment changes of Brazilian municipios. They use Conley's spatial GMM technique to allow for instrumental variable estimation in the presence of spatially autocorrelated errors. The main findings include: (1) a very strong influence of initial workforce educational levels on subsequent wage growth (controlling for possibly confounding variables such as remoteness and climate); (2) evidence of positive spillover effects of own-municipio growth onto neighbors' wage and employment levels; (3) an exodus from farming areas; (4) relatively elastic response of wages to an increase in labor supply; and (5) evidence of a local multiplier effect from government transfers.

Suggested Citation

Chomitz, Kenneth M. and Da Mata, Daniel and Ramos Magalhaes, João Carlos and Carvalho, Alexandre, Spatial Dynamics of Labor Markets in Brazil (October 2005). World Bank Policy Research Working Paper No. 3752. Available at SSRN: https://ssrn.com/abstract=844764

Kenneth M. Chomitz (Contact Author)

World Bank, Independent Evaluation Group ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Daniel Da Mata

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics ( email )

Rua Itapeva 474
São Paulo, São Paulo 01332-000
Brazil

João Carlos Ramos Magalhaes

Institute of Applied Economic Research (IPEA) ( email )

Av. Pres. Antonio Carlos , 51 - 17 andar
Rio de Janeiro, RJ, 20020-010
Brazil

Alexandre Carvalho

Institute of Applied Economic Research (IPEA) ( email )

Av. Pres. Antonio Carlos , 51 - 17 andar
Rio de Janeiro, RJ, 20020-010
Brazil

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