Wage inequality and employment composition in Brazil: a VEC estimation for the period 2004-2019

Abstract

During the first decade of the 21st century, the Brazilian economy stood out by conciliating growth with income inequality reductions. To better understand this growth process, I propose to study the dynamics of Brazil’s employment and wage inequality structure based on the hypothesis that there was a cumulative circular movement in which the reduction of income inequality, changes in the composition of the employment and growth reinforced each other. By econometrically testing the existence of this cumulative mechanism for Brazil for the years 2004-2019, I find that the employment composition and wage inequality are mutually related. The results highlight existing research gaps in understanding the relations between wage inequality and employment composition and avenues for further research.