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Local multiplier effect of the tradable sector on the Brazilian labor market

Abstract

The industrial sector has significant economic importance to the national and local economy, especially because it accounts for a significant portion of national employment and generates a multiplier effect on other economic sectors that goes beyond regional and national geographical boundaries. For these reasons, among others, the sector is often targeted by public policies to encourage regional economic growth. Based on Bartik (Bartik, T.J.: Who benefits from state and local economic development policies? W.E. Upjohn Institute for Employment Research (1991)) and Moretti (Moretti, Am. Econ. Rev. 100:1–7, 2010), using data from the demographic censuses conducted by the Brazilian Institute of Geography and Statistics (IBGE) and the Annual Report of Social Information (RAIS) tallied by the Economy Ministry for the years 1991, 2000 and 2010, we estimate the local employment multiplier of the tradable sector on the local labor market. The results indicate that for each job generated by the industrial sector, on average there is a reduction of at 2.6 unoccupied people, and 8 jobs are generated in the non-tradable sector. These results suggest that part of the multiplier effect is internalized by the local economy, since that the impact on unoccupied people is less than job creation.

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Fig. 1

Source: Elaboration of the authors from RAIS

Notes

  1. 1.

    Approximately half of the beneficiaries of the Bolsa Família program (financial benefit for poor households) reside in the Northeast region.

  2. 2.

    Data available at: https://www.br.undp.org/content/brazil/pt/home/idh0/rankings/idh-global.html.

  3. 3.

    Consult Dulci (2002) for contextualization about tax incentive policies for the attraction of industries.

  4. 4.

    For the Federal Revenue Service of Brazil, tax expenses are “indirect expenses of the government carried out through the tax system, aiming to meet economic and social objectives and constitute an exception to the Reference Tax System”.

  5. 5.

    Available at: https://receita.economia.gov.br/dados/receitadata/renuncia-fiscal/demonstrativos-dos-gastos-tributarios/arquivos-e-imagens/dgt-bases-efetivas-2017-serie-2015-a-2020-base-conceitual-e-gerencial.pdf.

  6. 6.

    In the case of states, the competition involves ICMS, a value-added tax levied at the state level, while municipalities compete through the effective rates of local service tax (ISS). It should be noted that the taxing powers of the three levels of government (federal, state, and municipality) are set by the Federal Constitution. The municipality is the local administrative unit in Brazil, it is a town or city.

  7. 7.

    The Shift-Share Instrument, also known as Bartik's instrument is consolidated in the regional economics and labor literature (Blanchard and Katz, 1992; Gould et al. 2002; Luttmer 2005; Saiz 2010; Moretti 2011).

  8. 8.

    Moretti (2010) contains a discussion about the magnitude of the multiplier effect for the non-tradable and tradable sectors.

  9. 9.

    Consulted at https://data.bls.gov/pdq/SurveyOutputServlet.

  10. 10.

    In GG 7 are "production system workers who tend to be discrete and who deal more with the shape of the product than with its physical–chemical content. While there is a tendency for discrete systems to become continuous, there are marked differences from the point of view of competencies, between forming a part and controlling the physicochemical variables of a process. " Available at: http://www.mtecbo.gov.br/cbosite/pages/informacoesGerais.jsf.

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Correspondence to Roberta de Moraes Rocha.

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Appendix

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Table 5 Description of economic subsectors—IBGE

5.

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de Moraes Rocha, R., de Araújo, B.C. Local multiplier effect of the tradable sector on the Brazilian labor market. Lett Spat Resour Sci 14, 269–286 (2021). https://doi.org/10.1007/s12076-021-00278-1

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Keywords

  • Local multipliers
  • Industrial employment
  • Bartik IV
  • Labor market

JEL Classification

  • R1
  • R12
  • R23