Effects of job change and interstate migration on wages in the Brazilian formal labor market: evidence from panel data

Abstract

This study examines the wage differentials arising from the job change and from migration of workers among states in the formal labor market in Brazil. Specifically, we investigate the situation where workers shift their job without migrating among states to identify whether the wage losses associated with worker mobility may occur due to changing jobs (firm effect). To this end, we use estimates to the wages differentials by pooled OLS, fixed effects, and random effects methods, applied to the database from Raismigra (Labor Ministry), a panel of data covering the years 1995 to 2006. We also performed robustness tests to identify the correct identification of the part relating to the regional’s effects and firm’s effects on the wage differentials of Brazilian’s workers in the formal market. The main results indicate that, after controlling for worker’s fixed effects, the change interstate migration and employment are important factors in determining wage differentials. After a significant reduction in the estimated coefficients of the state’s dummies and of firm change dummy - indicative of the importance of unobserved heterogeneity - the magnitude of the firm effect is lower than the magnitude of the effect of migration on wages in the formal sector.