capital. Moreover, they are the ultimate indicators of the quality of jobs generated by reforming economies.

Conventional analysis of changes in the wage structure typically focuses on changes in average wages for distinct skill groups of workers. For instance, in a regression setting least squares methods can yield (counterfactual) estimates of average wage differentials between workers that differ only in their education levels. Recent empirical work in labor economics has pointed out the limitations of this approach.<sup>9</sup> Unobservable heterogeneity that varies across groups of workers (e.g., differences in ability, family labor market connections, quality of schooling) is likely to affect labor market performance and the capacity to adapt to economic restructuring in a non-trivial way. For instance, if the creation of new more productive jobs (of a given skill) is sluggish, only those with more spunk or from better connected families may manage to be favorably re-employed in the higher wage jobs, while increased labor redundancy may drive down wages of workers in less favorable jobs.

Therefore, a focus on "average" wage trends may obscure the particular conditions that affect these men. We focus on characterization of changes in the _whdle_ distribution of wages rather than on average wage trends. We shall be especially interested in the evolution of real wages of those "typical" individual males located at the bottom quantiles of the wage distribution, or more generally those workers who earn wages lower than granted by their observable levels of skills and demographic characteristics.

For this, we estimate wage densities for several broadly defined groups of male workers and use quantile regression (Koenker and Bassett, 1978) to estimate wage differentials between workers in different points of the wage distribution given observed characteristics. For each year, we estimate regressions of the log of wages on the set of dummy variables for six quantiles (0.05, 0.1,0.25,0.5,0.75,0.9) and two different specifications.'I Conventional least squares (mean) regressions are obtained for reference and often yield results similar to median regression. The change in the resulting "adjusted" quantile wage differentials across the two periods are compared with the "raw" real wage growth rates obtained from a simpler age-education cell analysis. These are then used to identify male workers whose wages are lagging behind in the new economy along the entire wage distribution.

The analysis contrasts the evolution of wages across workers that differ in their endowment of general (education, experience) and specific (industry, occupation) skills and in demographic factors which influence wages (race, marital/headship status). An important characteristic of labor markets in the region is that a large segment of the workforce is "informal", that is, operates outside formal regulatory structures. Often seen

> 9 See for instance Buchinsky (1994), Mwabu and Schultz (1996), Arias, Hallock and Sosa (1999), Machado and Mata (1999), Maloney and Ribeiro (1999).

'° All the estimations and tests were carried out in Splus V. 4.5. In Brazil quantile regressions are estimated using recently developed interior point algorithms due to the large sample sizes. All the reported test statistics are based on related regression rank score procedures. See Appendix II for a brief description of the techniques. Koenker and Portnoy (1997) for a detailed discussion of quantile methods.

8