Human capital demand in Brazil: The effects of adjustment cost, economic growth, exports and imports

The objective of this paper is to learn about the effects of the adjustment costs, economic growth, imports and exports on human capital labor demand. The dynamic model proposed by Sargent (1978) was adjusted to consider three types of human capital: (a) one with fundamental education (1–8 years of schooling); (b) one with secondary education level (9–11 years of education); (c) and one with tertiary education level (12 years or more of schooling). Using state level panel data, the dynamic econometrics estimates showed the following results: (i) the labor market adjustment costs are very higher; (ii) the adjustment cost for the human capital with intermediary education level is the highest one compared to the others; (iii) the states’ economic growth favor those with superior education; (iv) the imports seems to favor the demand for those with intermediate education levels; (v) the degree of openness does show some weak effect on the demand for human capitals with intermediate education. In sum, the growing demand for human capital with some superior education seems to be more associated to its lower adjustment cost and economic growth; the non-significance of real wage elasticity and high adjustment cost seems to indicate that the human capital with intermediate knowledge is in short supply; hence, economic education policy that increases supply of such human capital are in need.