Age, education, and earnings in the course of Brazilian development: does composition matter?

BACKGROUND The impacts of shifts in the age distribution of the working-age population have been studied in relation to the effect of the baby boom generation on the earnings of different cohorts in the U.S. However, this topic has received little attention in the context of the countries of Asia and Latin America, which are now experiencing substantial shifts in their age-education distributions. OBJECTIVE In this analysis, we estimate the impact of the changing relative size of the adult male population, classified by age and education groups, on the earnings of employed men living in 502 Brazilian local labor markets during four time periods between 1970 and 2000. METHODS Taking advantage of the huge variation across Brazilian local labor markets and demographic census micro-data, we used fixed effects models to demonstrate that age education group size depresses earnings. RESULTS These effects are more detrimental among age-education groups with higher education, but they are becoming less negative over time. The decrease in the share of workers with the lowest level of education has not led to gains in the earnings of these workers in recent years. CONCLUSIONS These trends might be a consequence of technological shifts and increasing demand for labor with either education or experience. Compositional shifts are influential, which suggests that this approach could prove useful in studying this central problem in economic development.