Sergio Firpo and Alysson Portella. Decline in Wage Inequality in Brazil: A Survey complexity increases. He uses his model to analyze how changes in relative labor supply between 1998 and 2012 affected the wage distribution. He finds that the skill premium of workers with secondary and tertiary education with respect to those with primary or no education decreased considerably. However, in line with the work of Ferreira et al. (2017), the overall effect of changes in labor supply are negligible, since the reduction in returns to skills is followed by an endowment effect that increases inequality. Haanwinckel (2018) also models the impact of changes in demand and minimum wage, which we discuss in later sections.

Finally, in contrast with Haanwinckel (2018), Jaume (2018) develops a Ricardian economy with a unique good that is produced by the combination of infinitely many occupations that also vary in complexity. Again, more educated workers have comparative advantages over less educated ones that increase with respect to the complexity of occupations, which ensures positive assortative matching between workers and occupations. In his model, an increase in overall education has direct and indirect effects. First, with an increased relative supply of more educated workers, their wages reduce, making it more profitable for firms to employ them on less complex tasks. At the same time, the wages of less educated workers increase both because their relative supply reduced, but also because the higher demand for the occupation they perform, a consequence of increased production due to more complex occupations.<sup>8</sup> Hence, inequality should decrease as a consequence of educational expansion. He calibrates his model using representative data for the whole Brazilian economy in 1995 and the ISCO-88 3-digit occupation classification. Based on this model he then estimates the effects of education expansion between that year and 2014. His model predicts 85% of the decline in wage inequality during the period.

Hence, Jaume (2018) and Mak and Siow (2018) seem to agree between themselves and the previous literature on the relevance of education as a driver of inequality reduction, whereas Haanwinckel (2018) suggests that education had an ambiguous net impact on inequality due to opposing endowment and price effects, in line with the recent research of Ferreira et al. (2017), Alvarez et al. (2018), and Fern ́andez and Messina (2018). What is the source of such disagreement? On the one hand, these studies limit their analysis to static labor markets in which workers are allocated to occupations based on a quite limited number of characteristics, in the case Jaume (2018), only on their education.<sup>9</sup> On the other hand, the sources of shocks in Jaume (2018) and Mak and Siow (2018) are limited to

> 8The labor productivity of each occupation remains the same, but there is an implicit complementarity among occupations in the model. As the productivity of one occupation increases, more labor must be employed in other occupations to produce the unique final good, as the author assumes a Cobb-Douglas production function with elasticity of substitution equal to one.

> 9In the case of Mak and Siow (2018), workers are endowed with cognitive and non-cognitive skills.

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