Implications for public policies from changes in age-education composition

Ernesto F. Amaral, Federal University of Minas Gerais (UFMG), Brazil

Evidence from studies of the U.S. baby boom (Welch 1979, Freeman 1979, and Berger 1985) has suggested that increases in factor supplies led to the decline in wage rates of the expanding sub-aggregates, confirming the role of negative own-quantity elasticities of factor price. Using data at the micro level from a developing country (Brazil) makes it possible to take a formal model and estimate more precisely how changing cohort size and skill alter relative wage differentials. The core of this paper deals with the implications for public policies originated from the analysis by Amaral et al (2007). The decomposition of the impact on earnings of changes in age-education groups of workforce provides important policy insights. Furthermore, an analysis of inequality of income distribution among age-education groups is also performed. Finally, differences in the male population distribution and earnings by race pose some important policy implications.