# **2.1 Data Sources**

The empirical analysis in this paper combines and examines several sources of panel data from Brazil spanning the period 2003-2015. We provide a brief description of each data source in this section and give further details in Appendix A.3.

The main source of data is _Rela ̧c ̃ao Anual de Informa ̧c ̃oes Sociais_ (RAIS), a labor census gathering longitudinal data on the universe of workers and firms in formal sectors of Brazil. RAIS is a highquality administrative census of formal employers and employees, collected every year by the Brazilian Ministry of Labor. These records are used by the government to administer several government benefits programs. Workers are required to be in RAIS in order to receive payments of these programs, and firms face fines for failure to report.

RAIS covers virtually all formal workers in Brazil and provides yearly information on their demographics (age, gender, and schooling), job characteristics (detailed 6-digit occupation, wage, hours worked), as well as hiring and termination dates. For each job, the RAIS annual record reports average yearly earnings, as well as the monthly wage in December. We use the information on the December wage, so as to ensure that all labor market outcomes are measured at the same time and avoid potential mismeasurement for workers that did not work a full year. RAIS also includes information on a number of establishment-level characteristics, notably the number of employees, geographical location (municipality), and industry code (according to the 5-digit level of the Brazilian National Classification of Economic Activities). Unique identifiers (tax identification numbers) for workers and establishments make it possible to follow them over time. The establishment identifier contains 12 digits, and the first 8 digits make it possible to uniquely identify the firm.

We use the detailed classification of occupations to identify those who switch jobs. The Brazilian Classification of Occupations changed in 2002 (CBO-2) and has been reported consistently since 2003. Although the RAIS data are available for earlier years, we restrict the analysis to the post-2003 period to ensure that this important variable is defined in a consistent way throughout the sample period. There are 2637 occupation codes at the 6-digit level during this period. We use the information on the establishment’s location (municipality) and industry, as well as worker-level data on gender, age, education, and December wage. While the RAIS data cover segments of the public sector, we restrict the analysis to the private sector. We focus on workers aged 16 to 64 years old.

Using RAIS, we define a _labor market_ as a pair of a region and a sector. For sectors, we aggregate industries up to three broad sectors: agriculture, manufacturing, and services.<sup>10</sup> For regions, we use the “microregion” concept of the Brazilian Statistical Agency (IBGE) to define regional boundaries as in Dix-Carneiro and Kovak (2017). This definition groups economically integrated contiguous municipalities with similar geographic and productive attributes. We consider a set of 558 consistently

> 10We combine agricultural and natural resources industries into the agriculture sector.

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