Segmentation in the Brazilian Labor Market∗

This paper measures the degree of segmentation in the Brazilian labor market – the wage differential between formal and informal workers – with data from the Monthly Employment Survey (PME), a rotating panel of households in six metropolitan regions. Controlling for ob-servable and unobservable characteristics, we find that workers earn more in the formal sector, which supports the segmentation hypothesis. Contrary to other studies that rely on two-step procedures to correct for self-selection bias or repeated cross-sections to account for fixed effects, our true panel allows us, under certain conditions, to solve both problems simultaneously, pro-viding a better estimate of the wage differential. We also break down the degree of segmentation by age, gender, position in the household and other socio-economic attributes to identify the groups where this phenomenon is more prevalent. Finally, we investigate the robustness of our findings to the inclusion of self-employed individuals, and also use a two-stage panel probit model to test for a potential weakness of our simple fixed-effects estimator. Resumo Este artigo mede o grau de segmentação no mercado de trabalho brasileiro- o diferencial d