Abstract
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.
Highlights
The economic debate about the increase in income concentration in Brazil during the 1960s opposed, on the one hand, diagnoses based on the neoclassical theory of income determination and wage differentials as a reflection of the productivity gaps of agents, and, on the other, critical views that considered the class conflict and the repressive policies responsible for increasing inequality (Wells, 1974)
In addition to agreeing on government policies’ importance, they point out the effects of changes in the productive structure, whose dynamics were engendered mainly by industrial dynamics, on income distribution
In an approach led by aggregate demand, the authors argue that the growth of the industrialized sectors, that employed more qualified workers, and the increase in inequality were positively related in a cumulative income-concentrating process
Summary
The economic debate about the increase in income concentration in Brazil during the 1960s opposed, on the one hand, diagnoses based on the neoclassical theory of income determination and wage differentials as a reflection of the productivity gaps of agents, and, on the other, critical views that considered the class conflict and the repressive policies responsible for increasing inequality (Wells, 1974). In addition to agreeing on government policies’ importance, they point out the effects of changes in the productive structure, whose dynamics were engendered mainly by industrial dynamics, on income distribution. The role of the productive structure in the income distribution debate has been abandoned since allowing the neoclassical side to endure the approach of technology and education as the determinants of workforce productivity – and, inequality. The other side remained with the debate centered on politics, institutions, and class conflicts, resulting from workers’ and capitalists’ bargaining power
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