Informal labor contracts: an analysis of the Brazilian experience

For representing an expressive souree of labor absorption, the jobs with informal labor eontraet have been reeeiving a eonsiderable attention among the speeialists in the Brazilian labor rnarket. This paper presents, eoneisely, some stylized faets about this labor rnarket segment, as well as some oftheir most eommon interpretations. We argue that sue h interpretations are, in general, not very integrated and a model trying to make them eompatible is developed. The model ineorporates both segmentation and workers with heterogeneity in qualifieation. The results of the analysis are shown to be eompatible with most of the observed faets.

Elasticity of substitution between capital and labor: a panel data approach

This paper estimates the elasticity of substitution of an aggregate production function. The estimating equation is derived from the steady state of a neoclassical growth model. The data comes from the PWT in which different countries face different relative prices of the investment good and exhibit different investment-output ratios. Then, using this variation we estimate the elasticity of substitution. The novelty of our approach is that we use dynamic panel data techniques, which allow us to distinguish between the short and the long run elasticity and handle a host of econometric and substantive issues. In particular we accommodate the possibility that different countries have different total factor productivities and other country specific effects and that such effects are correlated with the regressors. We also accommodate the possibility that the regressors are correlated with the error terms and that shocks to regressors are manifested in future periods. Taking all this into account our estimation resuIts suggest that the Iong run eIasticity of substitution is 0.7, which is Iower than the eIasticity that had been used in previous macro-deveIopment exercises. We show that this lower eIasticity reinforces the power of the neoclassical mo deI to expIain income differences across countries as coming from differential distortions.

Labor supply, risk aversion and economic refrom in China

Economic reform in China has created a small, but fast-growing private sector that has spurred rapid productivity growth. Growth of the private sector is predicated upon continued labor movements away from state-run industries and into private firms. This paper presents a theory of labor market sectoral choice demonstrating that three factors determine private sector labor supply-the difference in wages between the state and private sectors, private sector wage risk and risk aversion. Estimation of the model using survey data provides strong support for the theory. We find that the riskiness of private sector earnings has a greater effect in discouraging workers from taking jobs in private firms than the wage premi um has in attracting workers.

Labor legislation and the size of informal sector in Brazil

This paper studies the increase in the rate of informal workers in the Brazilian economy that occurred between 1985 and 1999. We develop an overlapping generations model with incomplete markets in which agents are ex-post heterogeneous. We calibrate it to match some features of the Brazilian economy for 1985. We conduct a policy experiment which reproduces the 1988 constitution reforms that increased the retirement benefits and labor costs in the formal sector. We show that these reforms can explain the increase in informal labor. Then, we conduct a policy experiment and analyze its impact on the Brazilian economy.

Conditional cash transfers, schooling and child labor : micro-simulating bolsa escola

Cash transfers targeted to poor people, but conditional on some behavior on their part, such as school attendance or regular visits to health care facilities, are being adopted in a growing number of developing countries. Even where ex-post impact evaluations have been conducted, a number of policy-relevant counterfactual questions have remained unanswered. These are questions about the potential impact of changes in program design, such as benefit levels or the choice of the means-test, on both the current welfare and the behavioral response of household members. This paper proposes a method to simulate the effects of those alternative program designs on welfare and behavior, based on microeconometrically estimated models of household behavior. In an application to Brazil’s recently introduced federal Bolsa Escola program, we find a surprisingly strong effect of the conditionality on school attendance, but a muted impact of the transfers on the reduction of current poverty and inequality levels.

From public to private : the performance of former public workers in the Brazilian labor market

This paper analyzes the placement in the private sector of a subset of Brazilian public-sector employees. This group left public employment in the mid-1990’s through a voluntary severance program. This paper contrasts their earnings before and after quitting the public sector, and compares both sets of wages to public and private sector earnings for similar workers. We find that participants in this voluntary severance program suffered a significant reduction in average earnings wage and an increase in earnings dispersion. We test whether the reduction in average earnings and the increase in earnings dispersion is the expected outcome once one controls for observed characteristics, by means of counterfactual simulations. Several methods of controlling for observed characteristics (parametric and non-parametrically) are used for robustness. The results indicate that this group of workers was paid at levels below what would be expected given their embodied observable characteristics.

Skilled labor, unskilled labor, and economic growth

We assess the effects of the imperfect substitution between skilled and unskilled labor on economic growth in a model in which physical capital and skilled labor can be accumulated. It is shown that economies with higher substitutability between skilled and unskilled labor have higher levels of income per capita in the transition and in the long-run equilibrium. Furthermore, these economies have a higher level of skilled labor and a higher level of capital intensity in the long-run equilibrium. For certain parameters values, the speed of convergence depends positively on the elasticity of substitution between skilled and unskilled labor.

Is child labor harmful? the impact of working as a child on adult earnings

This paper explores the question: is working as young laborer harmful to an individual in terms of adult outcomes in income? This question is explored through the utilization of a unique set of instruments that control for the decision to work as a child and the decision of how much schooling to acquire. These instruments are combined with two large household survey data sets from Brazil that include retrospective information on the child labor and schooling of working-age adults: the 1988 and 1996 PNAD. Estimations of the reduced form earnings model are performed first by using OLS without controlling for the potential endogeneity of child labor and schooling, and then by using a GMM estimation of instrumental variables models that include the set of instruments for child labor and schooling. The findings of the empirical investigations show that child labor has large negative impact on adult earnings for both male and female children even when controlling for schooling. In addition, the negative impact of starting to work as a child reverses at around age 14. Finally, different child labor activities are examined to determine if some are beneficial while others harmful with the finding that working in agriculture as a child appears to have no negative impact over and above the loss of education.

Labor earnings dynamics in post-stabilization Brazil

This paper analyzes both the levels and evolution of wage inequality in the Brazilian formal labor market using administrative data from the Brazilian Ministry of Labor (RAIS) from 1994 to 2009. After the covariance structure of the log of real weekly wages is estimated and the variance of the log of real weekly wages is decomposed into its permanent and transitory components, we verify that nearly 60% of the inequality within age and education groups is explained by the permanent component, i.e., by time-invariant individual productive characteristics. During this period, wage inequality decreased by 29%. In the rst years immediately after the macroeconomic stabilization (1994

The long-term effects of conditional cash transfers on child labor and school enrollment

This paper investigates the long-term e ects of conditional cash transfers on school attainment and child labor. To this end, we construct a dynamic heterogeneous agent model, calibrate it with Brazilian data, and introduce a policy similar to the Brazilian Bolsa Fam lia. Our results suggest that this type of policy has a very strong impact on educational outcomes, sharply increasing primary school completion. The conditional transfer is also able to reduce the share of working children from 22% to 17%. We then compute the transition to the new steady state and show that the program actually increases child labor over the short run, because the transfer is not enough to completely cover the schooling costs, so children have to work to be able to comply with the program's schooling eligibility requirement. We also evaluate the impacts on poverty, inequality, and welfare.

Optimal Mirrleesian taxation in non-competitive labor markets

We study optimal labor income taxation in non-competitive labor markets. Firms offer screening contracts to workers who have private information about their productivity. A planner endowed with a Paretian social welfare function tries to induce allocations that maximize its objective. We provide necessary and sufficient conditions for implementation of constrained efficient allocations using tax schedules. All allocations that are implementable by a tax schedule display negative marginal tax rates for almost all workers. Not all allocations that are implementable in a competitive setting are implementable in this noncompetitive environment.