Dynamic wage curves: effects on real wages and long term unemployment for the Brazilian economy

Abstract

The following work aims to estimate wage/unemployment elasticities and to verify if different groups of individuals have differences regarding real wages flexibility. Hence, we use data from the Household Sample National Survey (Pesquisa Nacional de Amostra por Domicílios – PNAD) for six metropolitan areas – São Paulo, Rio de Janeiro, Recife, Salvador, Belo Horizonte e Porto Alegre – between 2001 and 2015. Applying the Dynamic Wage Curve Model and impulse-response analysis to these data suggest that there is, in the short-term, wage inflexibility on the labour market. Furthermore, there are substantial differences between mean wages and unemployment rate amongst the assessed groups. However, after an adverse productivity shock, represented by an increase of unemployment rate in the short-term, it was perceived that wage inflexibility is relatively homogeneous amongst the assessed groups within a period of up to six years. Individuals with nine or more years of study do have more wage flexibility, but only in the long-term, comprising periods of approximately fifteen years.