Unemployment Insurance in Developing Countries: The Case of Brazil

Few developing countries have adopted an Unemployment Insurance (UI) program but the list of countries considering its implementation is growing. Focusing on the Brazilian UI program and using administrative data covering the universe of formal employment, we provide empirical evidence documenting two relevant facts for the debate around the design of such program in countries characterized by a large informal sector and a lack of administrative and enforcement capacity. First, UI benefits strongly affects the timing of formal job finding for those workers able to find a formal job soon after job-loss. Second, those workers constitute a small share of the overall pool of UI beneficiaries, since most job-losers do not find a formal job rapidly. Therefore, offering UI is costly (most beneficiaries would exhaust their benefits for typical lengths of benefit duration) and UI benefits have little distortionary effect on the job-finding behavior of the average (formal) job-loser: they constitute pure income transfers for 3/4 of the potential beneficiaries. We further discuss implications of these 2 facts and highlight some interactions with job protection legislations (hiring costs), the main policy instrument used to protect workers from labor demand fluctuations in those countries.

Trade Liberalization and the Evolution of Skill Earnings Differentials in Brazil

Skilled labor earnings differentials decreased during the trade liberalization implemented in Brazil from 1988 to 1995. This paper investigates the role of trade liberalization in explaining these relative earnings movements. We perform several independent empirical exercises that check the traditional trade transmission mechanism, using disaggregated data on tari¤s, prices, wages, employment and skill intensity. We find that: i)employment shifted from skilled to unskilled intensive sectors, and each sector increased its relative share of skilled labor; ii) relative prices fell in skill intensive sectors; iii) tariff changes across sectors were not related to skill intensities, but the pass-through from tariffs to prices was larger in skill intensive sectors; iv) the decline in skilled earnings differentials mandated by the price variation predicted by trade is very close to the observed one. The results are compatible with trade liberalization accounting for the observed relative earnings changes in Brazil.Skill Earnings Differentials, Trade Liberalization, Tariffs Pass-through, Stolper-Samuelson

Labor Turnover and Labor Legislation in Brazil

One of the main characteristics of the Brazilian labor market is its impressively high job and worker turnover rates. Although labor legislation in Brazil is very restrictive, dismissal costs are not high when compared with other Latin American countries. Moreover, many authors argue that the design of some job security programs creates perverse incentives that generate labor turnover. The objective of this paper is twofold. First, we describe Brazilian labor legislation, with emphasis on job security provisions and their incentives on workers reallocation. Then, after reviewing the most recent evidence on labor turnover in Brazil, we investigate the effects of changes in job termination costs implemented in the 1988 Constitution and in a Labor Law of September 2001 on employment duration. Both legislation changes increased firing costs and should have, therefore, reduced turnover for formal workers affected by them. A simple differences-in-differences methodology is applied to monthly individual data from Pesquisa Mensal de Emprego (PME, IBGE), which has information on previous employment spells for those currently unemployed. The results establish that both changes reduced turnover for formal workers affected by the legislation. A significant increase in average employment duration of affected workers relative to not affected workers was observed after both legislation changes. We also provided evidence that the 1988 Constitutional change reduced the probability of fake layoffs, although there are still a high number of such agreements being made between workers and their employers.Labor Turnover, Employment Duration, Job Security Provisions in Brazil

Trade liberalization and evolution of skill earnings differentials in Brazil

From 1988 to 1995, when trade liberalization was implemented in Brazil, relative earnings of skilled workers decreased. In this paper, we in-vestigate the role of trade liberalization in explaining these relative earn-ings movements, by checking all the steps predicted by the Heckscher-Ohlin- style trade transmission mechanism. We find that: i) employment shifted from skilled to unskilled intensive sectors, and each sector increased its relative share of skilled labor; ii) relative prices fell in skill intensive sectors; iii) tari .changes across sectors were not related to skill inten-sities, but the pass-through from tari .s to prices was stronger in skill intensive sectors; iv) the decline in skilled earnings di .erentials mandated by the price variation predicted by trade is very close to the observed one. The results are compatible with trade liberalization, accounting for the observed relative earnings changes in Brazil.earnings inequality, trade liberalization

Trade liberalization and the evolution of skill earnings differentials in Brazil

Skilled labor earnings differentials decreased during the trade liberalization implemented in Brazil from 1988 to 1995. This paper investigates the role of trade liberalization in explaining these relative earnings movements. We perform several independent empirical exercises that check the traditional trade transmission mechanism, using disaggregated data on tariffs, prices, earnings, employment and skill intensity. We find that: i) employment shifted from skilled to unskilled intensive sectors, and each sector increased its relative share of skilled labor; ii) relative prices fell in skill intensive sectors; iii) tari¤ changes across sectors were not related to skill intensities, but the pass-through from tariffs to prices was larger in skill intensive sectors; iv) the decline in skilled earnings differentials mandated by the price variation predicted by trade was even larger than the observed one. The results are compatible with trade liberalization accounting for the observed relative earnings changes in Brazil. They also highlight the importance of considering the effects of differentiated pass-through from tariffs to prices.

Labor market regulations and the demand for labor in Brazil

The main objective of this study is to evaluate the impact of the 1988 changes in labor market regulations prescribed by the new Constitution on the level of employment and on the speed of employment adjustment in Brazil. From the many aspects of labor market regulations, this study concentrates on those that directly influence variable labor and dismissal costs. Evaluating the impact of changes in these costs on the level of employment and speed of adjustment is based on estimates of structural dynamic models for labor demand at different points in time before and after the 1988 constitutional change. The empirical strategy is to estimate such models from micro-longitudinal monthly data for a sample of 5,000 manufacturing establishments, which cover the period from January 1985 to December 1997. To try to isolate the effect of the constitutional change on the parameters of the labor demand function from the effects of the trade liberalization process and from the several stabilization plans that also occurred by the end of the 1980s, we regress our monthly estimates of these parameters on a temporal indicator of the 1988 constitutional change, controlling for a variety of other macroeconomic indicators.

Determinação de salários no Brasil: dualidade ou não-linearidade no retorno à educação?

O objetivo deste artigo é testar empiricamente a existência de dualidade no mercado de trabalho brasileiro. O método de análise consiste em avaliar em que medida são observadas diferenças salariais entre trabalhadores que não são explicadas apenas por diferenças nos seus atributos produtivos. São analisados os dados da Pesquisa Nacional por Amostra de Domicílios (PNAD/IBGE) de 1988, através da metodologia proposta por Dickens & Lang (1985 e 1992), a qual determina endogenamente os setores duais a partir de um modelo de switching-regressions. Os resultados sugerem que parece não haver dualidade no mercado de trabalho brasileiro. Apesar do modelo dual explicar melhor os salários do que um modelo competitivo linear, o seu desempenho é inferior ao de um modelo competitivo com não-linearidades no retorno à educação. A evidência faz crer que a educação é o determinante básico do salário e do acesso aos bons postos de trabalho no Brasil.