Classic and spatial shift-share analysis of state-level employment change in Brazil

This paper combines classic and spatial shift-share decompositions of 1981 to 2006 employment change across the 27 states of Brazil. The classic shift-share method shows higher employment growth rates for underdeveloped regions that are due to an advantageous industry-mix and also due to additional job creation, commonly referred to as the competitive effect. Alternative decompositions proposed in the literature do not change this broad conclusion. Further examination employing exploratory spatial data analysis (ESDA) shows spatial correlation of both the industry-mix and the competitive effects. Considering that until the 1960s economic activities were more concentrated in southern regions of Brazil than they are nowadays, these results support beta convergence theories but also find evidence of agglomeration effects. Additionally, a very simple spatial decomposition is proposed that accounts for the spatially-weighted growth of surrounding states. Favourable growth in northern and centre-western states is basically associated with those states’ strengths in potential spatial spillover effect and in spatial competitive effect