Intra-Plant Wage Responsiveness: Evidence from Brazil

A basic assumption in labor economics is that changes in wages paid to new workers are distributed to existing workers. However, there is little evidence to support this assumption. This paper uses Brazilian matched employer-employee longitudinal data to identify new jobs, and then measures the responsiveness of wages paid to existing workers to the wages paid to new workers. This measure of responsiveness is an indicator of the frictions existing workers are facing in the labor market. The study finds that workers are facing significant frictions, and then goes on to measure the wage responsiveness for different groups of workers, by sex, occupation, and location. The findings of this analysis has implications for labor market efficiency and labor’s share of income.