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| Leon Esquierro and Sergio Da Silva |
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| ''Is the Brazilian labor market granular?'' |
| ( 2024, Vol. 44 No.2 ) |
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| This study explores the impact of large firms, often referred to as “big grains,” on hiring and firing cycles in the Brazilian labor market. We found strong support for the granular hypothesis. Our methodology involved analyzing the power-law distribution, granular residuals, and the granular size of the labor market. Key findings include the observation that firms exhibit a power-law distribution based on their workforce size, with large companies' idiosyncratic shocks significantly influencing hiring and firing cycles. In particular, the service sector plays a substantial role in explaining these cycles, while manufacturing has limited explanatory power. We determined that the granular size of the Brazilian labor market consists of 15 firms engaged in public services, and private companies have a relatively minor impact on hiring and firing cycles. The policy implication here is that addressing periods of high unemployment in Brazil may be more effectively achieved by investing in public services rather than providing fiscal stimulus for manufacturing. This study contributes to the global body of evidence on labor market granularity and is compared with the existing research focused on Germany. We find that the Brazilian labor market is less granular than the German one. |
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| Keywords: Labor market, Hiring and firing cycles; Employment, Granularity; Granular hypothesis. |
JEL: J4 - Particular Labor Markets: General
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| Manuscript Received : Oct 16 2023 | | Manuscript Accepted : Jun 30 2024 |
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