_Brazilian spatial labor dynamics Page 7_ where dij is the great-circle distance between the centroids of i and j in kilometers, and α is the inflection point in kilometers, here set to 25. The effective radius of influence is about 50 kilometers. Analogous expressions were used to derive distance-weighted measures of population and of mean educational level, again excluding values from the target município. These variables were used as instruments for market potential.

The results reported here are divided into three categories: Brazil, nonmetropolitan Brazil and the latter without the North region. The difference between the first two categories is based on IPEA, IBGE and UNICAMP (2002). That work makes a comprehensive classification of Brazilian urban agglomerations. We used the municípios that belong to urban agglomeration only in the first category.

# **Spatial patterns of labor dynamics**

Figure 1 and tables 1-5 illustrate the geographic diversity of Brazil’s labor market dynamics over the period 1991-2000, a diversity we seek to explain. We classify MCAs into four categories, depending on whether wage growth was positive or negative, and whether employment growth was above or below the mean national population growth rate The most striking point evident from the maps is the general decline in real wages in the North and Northeast, and general increase elsewhere in the country. However, because population density varies tremendously across Brazil (see figure 2), maps can give a misleading impression of the number of people who fall into the labor dynamics categories. Tables 1-5, and population density maps (figure 2), provide a more accurate representation of population breakdowns.

The main point of the tables is spatial divergence and heterogeneity in experience. Areas in which employment grew rapidly but real wages declined (E+W-, shown in yellow in figure 1) can be thought of as areas of economic stagnation. Here, labor demand failed to keep up with the growth of supply. This may well reflect natural increase; the mean total fertility rate for the E+W- areas was 3.78 in 1991, far above the other three categories, and the proportion of immigrants in the 2000 population was substantially lower than for the E+W+ category. By 2000, about 22% of employed workers lived in the stagnant E+W- areas. They account for a particularly large share of population in the North and Northeast (figure 3).

A set of dynamic areas with both increasing wage growth and rapidly increasing employment (W+E+) absorbed more than half of the country’s net increase in employment, ending up with 36% of Brazilian employment in 2000. Such an outcome may reflect a dynamic local economy, with a relative shift outward in the labor demand curve. Although the 1991 total fertility rate for these MCAs was a full point lower than that of the E+W- areas, the dynamic areas had a substantial higher proportion of recent immigrants in 2000; this suggests that these regions are growing via immigration, presumably drawn by economic opportunity. Most of the E+W+ population is urban. Among the regions, the Center West has by far the largest proportion of people living in E+W+ AMCs, nearly 70%. The Northeast has the lowest proportion, just 10%.