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.

Essays on economic growth

A fundamental question in development economics is why some economies are rich and others poor. To illustrate the income per capita gap across economies consider that the average gross domestic product (GDP) per capita of the richest 10 percent of economies in the year 2010 was a factor of 40-fold that of the poorest 10 percent of economies. In other words, the average person in a rich economy produces in just over 9 days what the average person in a poor economy produces in an entire year. What are the factors that can explain this difference in standard of living across the world today? With this in view, this dissertation is a conjunction of three essays on the economic growth field which we seek a possible responses to this question. The first essay investigates the existence of resource misallocation in the Brazilian manufacturing sector and measures possible distortions in it. Using a similar method of measurement to the one developed by Hsieh and Klenow (2009) and firm-level data for 1996-2011 we find evidence of misallocation in the manufacturing sector during the observed period. Moreover, our results show that misallocation has been growing since 2005, and it presents a non-smooth dynamic. Significantly, we find that the Brazilian manufacturing sector operates at about 50% of its efficient product. With this, if capital and labor were optimally reallocated between firms and sectors we would obtain an aggregate output growth of approximately 110-180% depending on the mode in which the capital share is measured. We also find that the economic crisis did not have a substantial effect on the total productivity factor or on the sector's misallocation. However, small firms in particular seem to be strongly affected in a global crisis. Furthermore, the effects described would be attenuated if we consider linkages and complementarity effects among sectors. Despite Brazil's well-known high tax burden, there is not evidence that this is the main source of resource misallocation. Moreover, there is a distinct pattern of structural change between the manufacturing sectors in industrialized countries and those in developing countries. Therefore, the second essay demonstrate that this pattern differs because there are some factors that distort the relative prices and also affect the output productivity. For this, we present a multi-sector model of economic growth, where distortions affect the relative prices and the allocation of inputs. This phenomenon imply that change of the production structure or perpetuation of the harmful structures to the growth rate of aggregate output. We also demonstrate that in an environment with majority decision, this distortion can be enhanced and depends on the initial distribution of firms. Furthermore, distortions in relative prices would lead to increases in the degree of misallocation of resources, and that imply that there are distinct patterns of structural changes between economies. Finally, the calibrated results of the framework developed here converge with the structural change observed in the firm-level data of the Brazilian manufacturing sector. Thereafter, using a cross-industry cross-country approach, the third essay investigates the existence of an optimal level of competition to enhance economic growth. With that in mind, we try to show that this optimal level is different from industrialized and under development economies due to the technology frontier distance, the terms of trade, and each economy's idiosyncratic characteristics. Therefore, the difference in competition industry-country level is a channel to explain the output for worker gap between countries. The theoretical and empirical results imply the existence of an inverted-U relationship between competition and growth: starting for an initially low level of competition, higher competition stimulates innovation and output growth; starting from a high initial level of competition, higher competition has a negative effect on innovation and output growth. Given on average industries in industrialized economies present higher competition level. With that if we control for the terms of trade and the industry-country fixed effect, if the industries of the developing economy operated under the same competition levels as of the industrialized ones, there is a potential increase of output of 0.2-1.0% per year. This effect on the output growth rate depends on the competition measurement used.

Impactos econômicos das mudanças do PIS-COFINS utilizando um modelo de equilíbrio geral computável

Neste artigo é apresentada uma avaliação dos impacto da reforma tributária do PIS/PASEP e da COFINS, que passaram a ser coletados através de dois regimes associados aos fluxos domésticos (cumulativo e não cumulativo - misto) e a incidir sobre importações de bens e serviços. A metodologia adotada utiliza um modelo de Equilíbrio Geral Computável (CGE), adaptado para as novas características do sistema fiscal e especificado para simular os impactos sobre indicadores de bem-estar no Brasil. Estes impactos foram avaliados em duas etapas: a mudança do regime cumulativo para o novo regime tributário e a reforma completa. Os resultados mostram que esta reforma teria provocado deterioração dos indicadores macroeconômicos, de mercado de trabalho e de bem-estar.

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.