External Returns to Human Capital: Evidence from Brazilian Cities

The Journal of Development Studies, 2006

This paper estimates changes in the rates of return to human capital across the earnings distribution using data from over a 10-year period for Brazil. It uses these estimates to simulate the separate impacts of changes in returns to skills and changes in the supply of skills on earnings inequality. Evidence points strongly to growing inequality in rates of return to education in Brazil. This finding suggests that recent macroeconomic and trade reforms have been of most benefit to the skilled rather than the unskilled. Supporting evidence points to an improved competitiveness in the labour market, with workers increasingly rewarded for productivity. However, although increases in returns to education are more pronounced at the top of the earnings distribution, this did not in practice led to increased inequality. This is because levels of education and other labour market-rewarded endowments have increased and offset the rate of return effect. Appropriate education policy is therefore an essential partner for macroeconomic and trade reform if a developing economy is to avoid worsening income inequality.

Policy Research Working Papers, 2003

This paper undertakes an empirical examination of rates of return to human capital for men in Brazil through the period of macroeconomic stabilization and trade liberalization, using data from the PNAD household surveys. Simultaneous quintile equations are estimated to gain a picture of the impact of human capital on earnings across the hourly earnings distribution. We conclude that there is evidence for growing inequality in rates of return to education in Brazil. However we find evidence that education is no longer used as a screening device in the labor market, but rather rewarded for its innate association with higher productivity. Although increases in rates of return to education have been more pronounced at the top of the earnings distribution, this has not led to increased inequality. This is because levels of education and other labor market-rewarded endowments have increased and offset the rate of return effect.

2005

2015

We provide evidence of private returns to education and of externalities which jointly render social returns to education in Colombia. The spillover is generated by the share of collegeeducated workers within the working-age population. Thus, the higher this share in the cities, the higher the wages. The size of the externality is about 1.13; that is, an increase of one percentage point in the share will increase wages by 1.13%. For mid-to-high and high educated workers the externality is about 1.07 and 1.3 while for low educated workers it is 0.92,. The public policy program instituted by the agency in charge of promoting undergraduate and graduate education has contributed to increase wages all over the country but mainly in cities different from Bogotá. A positive correlation between the size of cities and human capital agglomeration is also observed; as a result, the size of cities also has predictive power on the externality.

Papers in Regional Science, 2005

The objective of this article is to analyze wage inequality among the 10 largest metropolitan regions in Brazil in the 1990s. We assess the extent to which worker characteristics (education, age, gender, race, position in the family) and job characteristics (occupational position, sector, experience) can explain wage inequality. The analysis is made both with regional-nominal and with regional-real wage data. In the second case regional price indexes are used to control for differences in cost of living among regions. Wage differentials in Brazil were slightly lowered when control variables were introduced, but the leftover inequality remained high. The results indicate that cost of living levels do have a role in explaining wage inequality in Brazil, but even after controlling for this factor, the remaining regional differentials are still important.

RDE - Revista de Desenvolvimento Econômico, 2011

This paper examines the convergence process in Brazil over the period 1985-2004, giving a special attention to the role of human capital in this process. Different measures of human capital are used in the growth regressions and the results show that they play a significant role in explaining the economic growth process. The evidence indicates that different levels of human capital have different impacts on per capita GDP growth, depending on the level of development of the regions. Lower levels of human capital explain better the convergence among the less developed states and higher levels of human capital are more adequate among the more developed states.

The Annals of Regional Science, 2012

This paper uses administrative data to follow Brazilian workers over time and examine what happens to the inter-regional wage differentials after controlling for unmeasured workers' characteristics that are fixed over time. Since the data allow us to track the same workers over the years, we are in the unusual position of obtaining the individual wages before and after the migration process. As a significant share of workers changed States in the sample period, it is possible to examine to what extent the wage differentials reflect the concentration of high skilled individuals in some States. The results show that the overall wage variability across States drops to almost one third of its original value and the ranking of the State effects is significantly altered after we take into account the workers' fixed effects. A great deal of the inter-regional differentials, therefore, reflects differences in the average ability of workers across States.

Economics of Education Review, 1993

This paper accomplishes two tasks. First, new estimates of rates of return to education for Brazil in 1989 are presented. The rate of return to an additional year of schooling is estimated to range between 12.8 and 15.1%. Less restrictive parameterizations reveal that the earnings-education profile is convex. Second, the customary Mincerian methodology used to estimate the rate of return from schooling is modified to capture the wage effects of changes in the educational structure of the labor force. This is accomplished by including labor market condition controls in earnings equations. The results suggest that workers with less than university education compete with each other (are substitutes) while workers at the upper end of the educational spectrum are complements to those with less education.

Earnings inequality has started to decrease in Brazil in recent years, after remaining very high for decades. We describe this decline using a flexible decomposition technique and assess the contributions of education and experience. We conclude that the main factors leading to the reduction of inequality in Brazil are the drop in education earnings differentials and the decline in the dispersion within demographic groups. The paper demonstrates the powerful impact that education can have on reducing inequality.

2011

Apresentam-se evidências de que os efeitos de espraiamento do conhecimento têm um traço setorial importante, ao menos na economia brasileira. Utilizando a base de dados da PNAD 2008, é mostrado que o salário indivídual é influenciado positiva e significativamente pela fração de pessoas no seu setor que tem pelo menos um mestrado. Adicionalmente, são mostradas evidências de que a fração de pessoas de determinada unidade federativa empregadas no setor de serviços às empresas exerce um efeito positivo e significativo sobre o salário dos indivíduos que vivem nesse estado. Ambos os resultados suportam o modelo teórico de Romer (1990) e evidenciam a existência de externalidades do capital humano em nível setorial. A terceira contribuição é fornecer evidências adicionais sobre a existência de retornos crescentes à educação no Brasil, revelando que estes retornos do não surgem em qualquer setor agregado específico.