HOUSEHOLD RESPONSES TO ECONOMIC SHOCKS IN BRAZIL

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This project will analyze household responses to short-run and long-run changes in household economic conditions in Brazil. The project will focus on changes in the labor force participation of women and children and on the schooling attainment of children. The project is motivated by the concern over social effects of macroeconomic fluctuations experienced by many developing countries in recent decades. Brazil experienced volatile economic cycles from 1976 to 1995, a period for which there exist excellent household survey data. These data make it possible to test whether worsening household economic conditions had effects such as decreasing children's school advancement. The project will use two exceptional data sets--the PNAD annual household surveys from 1976 to 1993, and the PME monthly employment survey from 1982 to 1995. These surveys provide data on over 20 million individuals over the tumultuous economic period from 1976 to 1995. The project will use the PME and PNAD to document short-run and long-run trends in wages, employment, and schooling for adults and children. The project will exploit the longitudinal structure of the PME to analyze short-run volatility in wages and decompose wage inequality into persistent and transitory components. The PME data will also be used to analyze labor force transitions for women and children. Regressions with the panel data using entry into the labor force and children's school advancement as dependent variables, with changes in husband's income and employment status as independent variables, will indicate the sensitivity of employment and schooling to short-run economic shocks. Interactions of economic shocks with variables such as husband's eduction will indicate whether responses to economic shocks are more extreme for poor households. The project will also look at the effects of long-run changes, such as improvements in adult schooling, on trends in employment and children's schooling during the 1976-95 period. These predicted effects will be compared with the predicted effects of short-run economic dislocations, providing evidence on the relative importance of short-run and long-run economic change on changes in schooling and employment over this period.