AN EMPIRICAL ASSESSMENT OF THE DEGREE OF ALOCATIVE FLEXIBILITY OF THE BRAZILIAN LABOR MARKET

Abstract

The study aims to assess the degree of Brazilian allocative flexibility, combining measures for degree of turbulence and mismatch. A market's flexibility is its ability to adjust to shocks quickly and to the proper extent. The magnitude of the adjustment depends on both the degree of flexibility and the shocks. As these are difficult to observe, changes in the medium term are used as a measure of shocks, which are called market turbulence indices. They are essentially a measure of how the market structure has changed between two time points. The mismatch measures, evaluated by the squared coefficient of variation of the unemployment rate, aim to match the unemployed with vacant jobs offered at a given point in time. The analysis is based on information from the National Household Sample Survey (PNAD), between 1976 and 1995, and from the Monthly Employment Survey (PME), between 1983 and 1996. The results indicate that the labor market in Brazil tends to be more subject to greater shocks, although the degree of flexibility is higher than the market in industrialized countries.