Quantitative Economics

Journal Of The Econometric Society

Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331

Quantitative Economics: Nov, 2022, Volume 13, Issue 4

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

https://doi.org/10.3982/QE1855
p. 1405-1446

Niklas Engbom, Gustavo Gonzaga, Christian Moser, Roberta Olivieri

Using rich administrative and household survey data spanning 34 years from 1985 to 2018, 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 changes show cyclical movements in Brazil that are similar to those in developed countries like the US. Relative to the formal sector, the informal sector is associated with a significant earnings penalty and higher earnings volatility for identical workers. Earnings changes of workers who switch from formal to informal (from informal to formal) employment are relatively negative (positive) and large in magnitude, dispersed, negatively (positively) skewed, and less leptokurtic. Our results suggest that informal employment is an imperfect insurance mechanism.


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Supplemental Material

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

Niklas Engbom, Gustavo Gonzaga, Christian Moser, and Roberta Olivieri

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

Niklas Engbom, Gustavo Gonzaga, Christian Moser, and Roberta Olivieri