Working Paper: NBER ID: w13533
Authors: Ernesto F. L. Amaral; Daniel S. Hamermesh; Joseph E. Potter; Eduardo L. G. Rios-Neto
Abstract: With rapidly declining fertility and increased longevity the age structure of the labor force in developing countries has changed rapidly. Changing relative supply of workers by age group, and by educational attainment, can have profound effects on labor costs. Their impacts on earnings have been heavily studied in the United States but have received little attention in Asia and Latin America, where supply shocks are at least as large and have often proceeded less evenly across the economy. We use data on 502 local Brazilian labor markets from Censuses 1970-2000 to examine the extent of substitution among demographic groups as relative supply has changed. The results suggest that age-education groups are imperfect substitutes, so that larger age-education cohorts see depressed wage rates, particularly among more-educated groups. The extent of substitution has increased over time, so that the decreasing size of the least-skilled labor force today is barely raising its remaining members' wages.
Keywords: demographic change; wages; labor demand; Brazil
JEL Codes: J23; O15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| changing relative supply of workers by age and education (J49) | significant impacts on wage rates (F66) |
| larger cohorts of more educated workers (J24) | depressed wage rates (J39) |
| decreasing size of least-skilled labor force (F66) | minimal wage increases for its remaining members (J38) |
| increase in supply of skilled labor (J24) | relative decline in its wage rate (F66) |
| higher educational attainment (I23) | more negative estimated elasticities of factor price (F16) |
| demographic changes (J11) | impacts on wages (F66) |