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Labour market outcomes of shifts in industrial composition in Brazil and Mexico

University of British Columbia

Conventionally, it is believed that wages are primarily determined by aggregate demand for labour, treating its industrial composition as irrelevant. E.g., while trade liberalization affects aggregate labour demand and its industrial composition by differently impacting within-industry labour demands, it is deemed to affect wages mainly through the former rather than the latter. In principle, given that industries pay differently to similar workers, compositional shifts that favour high premium industries, increase the likelihood of high-paying employment and raise the value of outside options for unemployed workers within skill-groups. Consequently, wages strategically increase in all industries. Chapters 1 and 2 explore whether after controlling for changes in aggregate demand for labour, shifts in its industrial composition play an important role in determining wages. Guided by the outcome of a general equilibrium model, exogenous, trade-induced variation in change in composition of local employment across cities in Mexico and Brazil during the 1990s is used to identify the associated causal wage effects, while controlling for changes in local demands for labour. It is found that shifts in industrial composition of local employment substantially impacts local sectoral wages. Not much is known about the reasons behind differences in self-employment rate across space. While differences in local factors might matter, such factors are also impacted by changes in self-employment rate, making identification difficult. Chapter 3 asks to what extent local wages and wage-employment rate are important in determining local self-employment rate. Building on the structure provided by a multi-city, multi-industry search and bargaining model of a labour market, the 1991 and 2000 waves of the Brazilian household census data are used to identify the long-term, causal effects of local employment rate and wages on local self-employment rate across Brazilian sub-national labour markets. Exogenous variation in local structures of wages and employment across Brazilian cities that were induced by trade liberalization of the 1990s in Brazil are used as the basis of the identification strategy. It is found that reallocation to self-employment from unemployment causally, and inversely, depends on local average wage and employment rate, and is substantially more responsive to changes in local wages.

Text

2011-11-24

Attribution-NonCommercial-NoDerivatives 4.0 International

http://hdl.handle.net/2429/39253

Economics

University of British Columbia

UBCV

http://creativecommons.org/licenses/by-nc-nd/4.0/