Sergio Firpo and Alysson Portella. Decline in Wage Inequality in Brazil: A Survey account for a reduction in wage inequality, as measured by the Gini index, of -0.30 in the period, while the whole reduction in the Gini was -8.95 points. Changes in the payment structure related to these racial and gender gaps account for -1.59 and regional and urban-rural gaps for -1.27, respectively. Taken together, the total effect of these three categories explain around 1/3 of the reduction in inequality in the period. However, these changes in payment structure were more important up to 2003. This may caution against expecting that such trends will continue to contribute to the drop in inequality in the coming years.

What was behind the reduction in such gaps? The answer to this question is far from clear, and probably varies among these groups. With respect to regional gaps, the conclusions drawn by Dix-Carneiro and Kovak (2017) may provide some guidance. They found that regional wage premia decreased substantially for regions more affected by trade liberalization, and this effect instead of vanishing in the long-run actually exacerbates, with more affected regions observing relative decreases both in average wages and employment. Even though the authors do not explore this possibility, their finding can explain the convergence in regional gaps if the regions most affected by trade liberalization are precisely those that exhibited the largest premia. Ad ̃ao (2015), in the context of the commodity boom, argued that the regions more affected by the rise in commodity prices were precisely the ones with lower average wages. Therefore, regional gaps should decrease. Similarly, if the commodity boom benefited mostly rural areas, it should have also contributed to the reduction in the gap between urban and rural areas.<sup>16</sup> Freguglia and Menezes-Filho (2012) use data from RAIS to investigate the decrease in inter-regional wage differentials and show that nearly 2/3 of the differences in regional wage premia are explained by differences in composition, including unobserved ability. Hence, we should also expect that at least part of the convergence in regional gap be the result of a convergence in the distribution of skills across regions.

Trade liberalization may also have played a role in reducing gaps among minorities, a possibility investigated by Hirata and Soares (2016) with respect to the black-white wage gap. The prediction of taste-based discrimination models is that racial gaps should decline with increased competition (Becker, 1955). Hirata and Soares (2016) find that regions that were more exposed to foreign competition after trade liberalization in the early 1990s are also the regions with larger declines in the conditional racial wage gap between 1991 and 2000. Racial gaps may also have fallen as a consequence of decreased interfirm heterogeneity in wages. Gerard et al. (2018) show that 20% of the whitenonwhite wage gap is explained by nonwhites being less likely to work in firms with higher wages, and at least one third of this under-representation is due to unexplained preference

> 16We thank Liliana Sousa for suggesting this channel.

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