Human Capital and the Recent Fall of Earnings Inequality in Brazil

Abstract

Earnings inequality has started to fall in Brazil in recent years, after remaining very high for decades. We describe this decline using a flexible decomposition technique and assess the contributions of education and experience. We conclude that the fall in education earnings differentials and the decline in the dispersion within demographic groups are the main factors leading to the reduction of inequality in Brazil. The paper demonstrates the powerful impact that education can have to reduce inequality.