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A closer look at the skilled labor demand increase in Brazil

Paulo de Andrade Jacinto (Faculdade de Administração, Contabilidade e Economia, Pontificia Universidade Católica do Rio Grande do Sul, Porto Alegre, Brazil)
Eduardo Pontual Ribeiro (Department of Economics, Federal University of Rio de Janeiro, Rio de Janeiro, Brazil)
Tulio Cravo (Labor Markets Division, Inter-American Development Bank, Washington, DC, USA)

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 8 May 2017

Abstract

Purpose

The purpose of this paper is to evaluate skilled labor demand determinants in Brazil, considering alternatives explanations: changes in relative wages, non-homothetic technology output growth and skill-biased technical change.

Design/methodology/approach

This study relies on a rich and unique matched employer-employee data set for manufacturing sector, from 1996 to 2003. The analysis considers a translog functional form labor demand system estimated using seemingly unrelated regression and instrumental variables to control for possible measurement errors and wages and output endogeneity.

Findings

The demand function estimates suggest that: labor demand underlying technology is non-homothetic, research and development investment is biased toward skilled workers, the non-homothetic technology is not skill biased so output changes contributed positively for skilled labor increase, relative wages played a significant role and international trade has little explanatory power explaining labor demand shifts.

Originality/value

This is the first paper that considers alternative explanations for the increase in the demand of skilled workers for manufacturing in Brazil simultaneously: changes in relative wages, output changes with non-homothetic technology, skill-biased technical change and, to a lesser extent, international trade. The study challenges current empirical evidence that considers trade and trade liberalization as the main factor explaining labor demand shifts.

Keywords

Citation

Jacinto, P.d.A., Ribeiro, E.P. and Cravo, T. (2017), "A closer look at the skilled labor demand increase in Brazil", Journal of Economic Studies, Vol. 44 No. 2, pp. 294-312. https://doi.org/10.1108/JES-08-2014-0146

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited