Wage differentials in Brazil: theory and evidence

The investigation of wage determination and wage differentials in developing countries has concentrated on the effects of human capital and different sources of segmentation associated with institutional arrangements and structural characteristics on earnings. In this article, we use micro-data for Brazil for the 1980s and 1990s to test several competitive theories, and models with segmentation explained by efficiency wages. We find that unmeasured abilities and efficiency wage models seem to play a role in wage determination, while compensating differentials and transitory difference theories were found to be irrelevant to wages formation. One of the most intriguing issues in labour economics has been the pattern of inter-industry wage differentials. Economists have found a remarkable regularity in wage dispersion within and between countries, even afte