Insider Power in Wage Determination: Evidence from Brazilian Data

This paper examines the determinants of industrial real wages in Brazil, making use of panel data on 22 industry sectors with monthly observations for the period 1985–93. The main objective is to test whether industrial wages in Brazil respond to sectoral performance. In line with the evidence for other countries, the overall results suggest that sectoral conditions (insider effects) play an important role in real wage determination in Brazil. This is also indicative that the Brazilian wage-setting structure is far from conforming to the traditional textbook description of competitive models and appears rather conducive to rent sharing.