Labor Market Experience and Falling Earnings Inequality in Brazil: 1995-2012 - Abstract

Jul 19, 2026

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The Gini coefficient of labor earnings in Brazil fell by nearly one-fifth between 1995 and 2012, dropping from 0.50 to 0.41. Other inequality measures declined even more, including the 90-10 percentile ratio, which fell by almost 40%. Using micro-econometric decomposition, the study isolates proximate drivers: reduced returns to labor market experience explain most of the Gini decline, while gender, race, regional, and urban-rural gaps conditional on human capital and institutions also matter. Two forces counteract progress.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages31

Reading Time1 h 18 min

Abstract

Introduction

Income inequality trends and policy interest

Cases where inequality falls

Aim and scope of the paper

Pub lic Disclosure Authorized Pub lic Disclosure Authorized The World Bank Economic Review, 36(1), 2022, 37–67 [https://doi.org10.1093/wber/lhab005](https://doi.org10.1093/wber/lhab005) Article Labor Market Experience and Falling Earnings Inequality in Brazil: 1995–2012 Francisco H. G. Ferreira, Sergio P. Firpo, and Julián Messina Abstract The Gini coefficient of labor earnings in Brazil fell by nearly a fifth between 1995 and 2012, from 0.50 to 0.41 . The decline in other measures of earnings inequality was even larger, with the 90-10 percentile ratio falling by almost 40 percent. Applying micro-econometric decomposition techniques, this study parses out the proximate determinants of this substantial reduction in earnings inequality. Although a falling education premium did playa role, in line with received wisdom, this study finds that a reduction in the returns to labor market experience was a much more important factor driving lower wage disparities. It accounted for 53 percent of the observed decline in the Gini index during the period. Reductions in horizontal inequalities – the gender, race, regional and urban-rural wage gaps, conditional on human capital and institutional variables – also contributed. Two main factors operated against the decline: a greater disparity in wage premia to different sectors of economic activity, and the “paradox of progress”: the mechanical inequality-increasing effect of a more educated labor force when returns to education are convex. JEL classification: D31, J31 Keywords: earnings inequality, Brazil, returns to experience 1. Introduction Rising income inequality has attracted a great deal of recent attention in both academic and policy circles.1 The sustained rise in wage and income inequality in the United States since 1980 has garnered particular interest, with a large literature debating the relative importance of various contributing factors, such as changes in technology; the role of international trade; changes in the relative supply of skills; and changes in labor market institutions, such as falling unionization rates and real minimum wages. Inequality has also been rising in many other countries, both rich and poor (Alvaredo and Gasparini 2015; Morelli et al. 2015), often leading to a perception that it is rising everywhere. The World Inequality Report 2018, for Franciso H. G. Ferreira ([f.d.ferreira@lse.ac.uk](f.d.ferreira@lse.ac.uk)) is at the International Inequalities Institute, London School of Economics, UK, and IZA, Bonn, Germany. Sergio P. Firpo ([firpo@insper.edu.br](firpo@insper.edu.br)) is at the Insper Institute of Education and Research, São Paulo, Brazil, and IZA, Bonn, Germany. Julián Messina ([julianm@iadb.org](julianm@iadb.org)) is at the Inter-American Development Bank, Washington, DC, and IZA, Bonn, Germany. The authors are grateful to Camila Galindo, Elizabeth Jaramillo, Nicolás Guida Johnson, and Juan Pablo Uribe for excellent research assistance. They also thank the editor, Eric Edmonds; two anonymous referees; Edmund Amann; Armando Barrientos; Dean Jolliffe; Nora Lustig; Ben Ross Schneider; and seminar participants at MIT, Brown University, George Washington University, Tulane University, the World Bank, the University of Cape Town, King’s College London, and USP-Ribeirão Preto, as well as at various conferences, for comments on earlier versions. All errors are our own. A supplementary online appendix is available with this article at The World Bank Economic Review website. 1 See, e.g., Stiglitz (2012) and Piketty (2014) . © The Author(s) 2021 . Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / THE WORLD BANK. This is an Open Access article distributed under the terms of the Creative Commons Attribution License ([http://creativecommons.org/licenses/by/4.0/](http://creativecommons.org/licenses/by/4.0/)), which permits unrestricted reuse, distribution, and reproduction in

FAQs

How much did labor earnings inequality in Brazil decline from 1995 to 2012?

The Gini coefficient for labor earnings fell from 0.50 to 0.41, nearly a fifth. The 90-10 percentile ratio declined by almost 40%.

What method does the study use to explain the decline in earnings inequality?

It applies micro-econometric decomposition techniques to parse proximate determinants of the observed reduction in earnings inequality.

Which factor explains most of the Gini decline during 1995–2012?

A reduction in the returns to labor market experience is identified as much more important than the falling education premium, accounting for 53% of the observed Gini decline.

Jul 19, 2026

Upload by Noah