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An evaluation of the Brazilian informal labor market from 1995 to 2008

Author

Listed:
  • Paulo Roberto Amorim Loureiro
  • Ricardo Azevedo Araujo
  • Nathalia Almeida de Souza

Abstract

Purpose - The aim of this paper is to perform an evaluation of the Brazilian informal labor market, following the lines suggested by Araujo and Souza. The paper focuses on the Brazilian labor market by using data from the National Household Sampling Survey – PNAD/IBGE, from 1995 to 2008. Design/methodology/approach - The paper uses four different methodologies: the OLS, pseudo‐panel with fixed effects, instrumental variables and the Heckman selection model. The data for this study were obtained at the National Household Sampling Survey – PNAD/IBGE, from 1995 to 2008, with an exception to the years of 1994 and 2000, when this survey did not occur. The cross‐section data were pooled and divided in two periods: 1995‐2002 and 2003‐2008. The sample ranges individuals from 22 to 57 years of age. Findings - The empirical findings show that although wages play an import role in the decision of workers and firms, all wage gaps between formal and informal markets reduced considerably, as has been pointed out by Mattos and Ogura. However, an increase in one year of study would raise the probability of participating in the formal sector while diminishing the probability of joining the informal sector. Besides, the skill premium in the formal sector is higher than in the informal sector. Originality/value - Results indicate that the main difference between the 1995‐2002 and 2003‐2008 period is the impact of education over wages. Returns to education for the second period are greater than for the first period analyzed. The monetary gains for the first period vary from 16.5 to 18.2 percent for formality and from 12.2 to 14.3 percent for informal labor. Whereas, for the second period these gains range from 19.7 to 22.6 percent and from 16.9 to 18.2 percent, for formality and informality, respectively. According to these findings, investments made on education were more profitable for the 2003‐2008 period. However, all wage gaps between formal and informal markets reduced considerably, which reinforces the fact that workers are increasingly deciding in which market to operate.

Suggested Citation

  • Paulo Roberto Amorim Loureiro & Ricardo Azevedo Araujo & Nathalia Almeida de Souza, 2013. "An evaluation of the Brazilian informal labor market from 1995 to 2008," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 40(1), pages 71-87, January.
    • Handle: RePEc:eme:jespps:v:40:y:2013:i:1:p:71-87
    DOI: 10.1108/01443581311283510
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    Citations

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    Cited by:

    1. Facundo Quiroga‐Martínez & Esteban Fernández‐Vázquez, 2021. "Education as a key to reduce spatial inequalities and informality in Argentinean regional labour markets," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(1), pages 177-189, February.
    2. Colin C. Williams & Ioana Alexandra Horodnic & Jan Windebank, 2017. "Evaluating the internal dualism of the informal sector: evidence from the European Union," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 44(4), pages 605-616, September.

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