Brazilian Wage Phillips Curve: A Quantile Regression Approach

Abstract

In this study, we aim to estimate the Wage Phillips Curve to investigate the connection between labor market conditions and wage growth dynamics in Brazil. To identify nonlinearities in the coefficients, we employ a two-stage quantile regression method to address the endogeneity of the regressors. Overall, our findings suggest heterogeneous effects of the unemployment rate on wage inflation, depending on its position in the conditional distribution. Additionally, we observe varying contributions of wage inertia and expectations to price levels in shaping nominal wage dynamics over the analyzed period. The results also indicate a reduction in the correlation between the observed unemployment rate and the nominal wage growth rate in recent years.