Brazilian wage curve: Further evidence based on spatial interactions in times of recession, 2012–2019
By: Paula, Guilherme Cemin de and Marques, André M
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Material type: 
BookPublisher: The Indian Journal of Labour Economics Description: 65(3), Jul-Sep, 2022: p. 688-708.Subject(s): Labour market, Spatial wage curve, Unemployment, Spatial spillovers, Bargaining power
In:
The Indian Journal of Labour EconomicsSummary: This paper verifies the existence of a spatial Brazilian wage curve based on individual hourly real wages using quarterly data from the Brazilian National Household Sample Survey for the period 2012 to 2019, probably the largest dataset ever used in this field. Our spatial regression model enables us to estimate both the magnitude and dispersion of the local wage’s rigidity and its response to variations in the level of unemployment in neighbouring states—the spatial spillover. We find strong evidence for negative and significant spatial spillovers affecting local real hourly wages in the whole sample and 13 out of 20 different worker categories. For the entire sample, a 100% increase in local unemployment reduces the individual real wage in Brazil by 2.61% while the same increase in unemployment in contiguous states leads to an additional 1.00% reduction in wages. The findings indicate an overestimation of the real wage elasticity when the regression model neglects significant spatial autocorrelation. The results are robust to spatial effects present in the data, the weak instruments problem, and endogeneity of the regressors.- Reproduced
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Articles
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Indian Institute of Public Administration | 65(3), Jul-Sep, 2022: p. 688-708 | Available | AR128263 |
This paper verifies the existence of a spatial Brazilian wage curve based on individual hourly real wages using quarterly data from the Brazilian National Household Sample Survey for the period 2012 to 2019, probably the largest dataset ever used in this field. Our spatial regression model enables us to estimate both the magnitude and dispersion of the local wage’s rigidity and its response to variations in the level of unemployment in neighbouring states—the spatial spillover. We find strong evidence for negative and significant spatial spillovers affecting local real hourly wages in the whole sample and 13 out of 20 different worker categories. For the entire sample, a 100% increase in local unemployment reduces the individual real wage in Brazil by 2.61% while the same increase in unemployment in contiguous states leads to an additional 1.00% reduction in wages. The findings indicate an overestimation of the real wage elasticity when the regression model neglects significant spatial autocorrelation. The results are robust to spatial effects present in the data, the weak instruments problem, and endogeneity of the regressors.- Reproduced
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