Further Evidence on Wage and Productivity Differentials in Brazil

This paper discusses the relationship between the elasticities of wages and productivity with respect to human capital. The goal is to search if there is a distortion on the expected relationship between these two variables, given market forces and a selfish behavior by agents, as it is found in some Europeans countries. A general equilibrium, overlapping generation model that can capture the relationship between these two elasticities is presented. Two equations that emerge from this model are estimated, using data from RAIS and IBGE Pesquisa Industrial Annual for 2000. The results indicate that local labor market attenuates income inequality, transferring income from more qualified to less qualified workers, similarly to what happens in European labor markets.