economic sector, demographic composition, educational...

Economic sector,demographic composition,

educational attainment,and earnings in Brazil

Samantha Faustino([email protected])

Bernardo Queiroz([email protected])

Ernesto Amaral([email protected])

Guilherme Gonçalves([email protected])

Objective• Brazil has been experiencing major changes

– Population aging– Educational improvement– Increase of workers in the formal economic sector– Oscillation of earnings by economic sector

• Do changes in demographic, educational, and economic sector compositions affect earnings over time?– Estimate associations of individual- and area-level

variables with individual earnings of male workers2

Previous studies• Brazil still experiences a high rate of jobs in the informal

economic sector, which is a challenge to the economy (Ulyssea 2005; Ramos 2002; Mello, Santos 2009; Barbosa Filho, Moura 2015; Botelho, Ponczek2011; Carneiro, Henley 2001)

• Most self-employed workers in Brazil have low education, evade tax, and are unlikely to employ other people or expand their businesses (Narita 2013; Botelho, Ponczek 2011; Bargain, Kwenda 2014)

• Informal firms are small and less productive businesses with low per capita income (Barros, Ulyssea 2010)

• Previous analyzes have mixed results about whether workers in formal jobs receive higher wages than in informal jobs, controlling for their productivity

3

1980, 1991, 2000, 2010 Censuses• Dependent variable

– Natural logarithm of individual earnings of Brazilian

male workers on primary occupation

• Independent variables– 16 age-education indicators (G)

• Age: 15–24, 25–34, 35–49, 50–64

• Education: less than primary, primary, secondary, university

– Distribution of the male population in 16 age-

education groups for 502 areas (Xga)

– Controls: race/color, marital status, religion, region4

OLS models1. Binary variable for economic sector (Formal)

log(Yi) = β0 + β1Gi + β2Xga + β3Formali + εi

2. Proportion of formal workers by area (Pa)log(Yi) = β0 + β1Gi + β2Xga + β3Pa + εi

3. Interaction of sector and age-education group (I)log(Yi) = β0 + β1Gi + β2Xga + β3Formali + β4Ii + εi

4. Only formal economic sectorlog(Yi) = β0 + β1Gi + β2Xga + εi

5. Only informal economic sectorlog(Yi) = β0 + β1Gi + β2Xga + εi

5

Description of sample

6

Year

Informaleconomic

sector(%)

White(%)

Married(%)

Protestant(%)

Samplesize

1980 22.7 61.6 56.3 5.9 4,309,110

1991 30.8 56.2 66.8 7.9 2,775,824

2000 40.9 57.8 48.7 13.5 3,305,805

2010 33.5 51.0 43.2 20.3 3,708,484

• We analyze only males in urban areasSource: 1980, 1991, 2000, and 2010 Brazilian Demographic Censuses.

Real earnings by economic sector

7

0.00

250.00

500.00

750.00

1,000.00

1,250.00

1,500.00

1,750.00

2,000.00

1980 1991 2000 2010

Mon

thly

Bra

zilia

n R

eais

Year

Informal Formal

Source: 1980, 1991, 2000, and 2010 Brazilian Demographic Censuses.

8

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

1980 1991 2000 2010Year

Less than primary Primary Secondary University

Male age-education compositionFormal sector, age 25–34


9

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

1980 1991 2000 2010Year


Male age-education compositionFormal sector, age 35–49


10

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

1980 1991 2000 2010Year


Male age-education compositionInformal sector, age 25–34


11

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

1980 1991 2000 2010Year


Male age-education compositionInformal sector, age 35–49


Model results• Higher earnings: older, better educated, white,

married, non-Protestant, South, and Center-West regions

• Proportions of people in age-education groups tend to have negative associations with earnings– Mostly among older workers and those with

secondary education

• Now focus on results about economic sector...

12

Equation 1: Formal vs. Informal

13

1.39

1.24

1.30 1.31

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

1.40

1.45

1980 1991 2000 2010

Expo

nent

ial o

f coe

ffici

ent

Year


14

0.48

0.80

0.42

0.74

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1980 1991 2000 2010

Elasticity

Year


Equation 2: Effects of proportionin the formal sector (Pa)

15

-1.00

-0.75

-0.50

-0.25

0.00

0.25

0.50

0.75

1.00

1.25

1980 1991 2000 2010

Elas

ticity

Year

Less than primary Primary Secondary University Reference

Equation 4: Effects of group proportions (Xga)Formal sector, age 25–34


16

-1.00

-0.75

-0.50

-0.25

0.00

0.25

0.50

0.75

1.00

1.25

1980 1991 2000 2010

Elas

ticity

Year


Equation 4: Effects of group proportions (Xga)Formal sector, age 35–49


17

-1.00

-0.75

-0.50

-0.25

0.00

0.25

0.50

0.75

1.00

1.25

1980 1991 2000 2010

Elas

ticity

Year


Equation 5: Effects of group proportions (Xga)Informal sector, age 25–34


18

-1.00

-0.75

-0.50

-0.25

0.00

0.25

0.50

0.75

1.00

1.25

1980 1991 2000 2010

Elas

ticity

Year


Equation 5: Effects of group proportions (Xga)Informal sector, age 35–49


Discussion• Informal sector tends to have younger and less

educated workers with lower earnings• Increase in proportion of workers in the formal

economic sector had positive effects on earnings– Indication of relatively integrated labor market,

instead of presenting two segmented sectors

• Effects of proportions in age-education groups vary more among workers in the informal sector– Indication of higher levels of economic inequality

among these workers in recent years

19

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