an  average  of  18%  in  1998.<sup>9</sup>

# **2.2.   Worker   data**

The  linked  employer–employee  data  are  from  the  Brazilian  Labor  Ministry,  which  requires by  law  that  all  formally-­‐registered  firms  report  to  the  ministry  on  all  workers  in  every year.<sup>10</sup> These  administrative  records  have  been  collected  in  the _Relação  Anual  de Informações  Sociais_ (RAIS)  database  since  1986.  In  this  paper,  we  use  information  from RAIS  for  the  years  1990  through  1998,  when  we  also  have  complementary  data  on  the export  status  of  firms  and  industry-­‐level  tariff  rates.

The  main  benefit  of  the  RAIS  database  is  the  ability  to  trace  individually-­‐identifiable workers  over  time  and  across  firms.  The  data  include  a  unique  worker-­‐identification number  (which  remains  with  the  worker  throughout  his  work  history),  the  tax  number  of the  worker’s  firm,  the  industrial  classification  of  the  worker’s  firm<sup>11</sup> ,  and  the  municipality  of the  worker’s  firm.  These  data  are  particularly  valuable  as  they  offer  variables  beyond  the available  information  in  many  other  firm-­‐level  databases,  often  used  in  studies  like  ours.  In particular,  the  data  contain  detailed  information  on  workers’  skill-­‐levels  (as  defined  by occupation<sup>12</sup> and  education),  which  are  paramount  to  this  analysis.  Other  variables  of 9  Trade  policy  reforms  coincided  with  gradual  foreign  investment  liberalizations  and  the privatization  of  state-­‐owned  companies,  both  of  which  contributed  to  attracting  substantial  capital inflows  over  this  time  period.  Meanwhile,  the  government’s  regional  development  plans  also included  export  promotion  policies  as  explicit  elements,  helping  to  boost  exports  beginning  in  1995. In  each  specification,  we  include  region-­‐specific  year  dummies  to  capture  the  impact  of  these  and other  general  macroeconomic  trends  on  wages.

10  The  process  for  firms  to  report  on  their  workers  is  extensive  and  costly.  However,  this  information is  used  to  administer  payments  of  the  annual  public  wage  supplements  to  every  formally-­‐employed worker,  thus  creating  a  strong  incentive  for  workers  to  urge  their  employers  to  report  accurately.  In practice,  however,  only _formally_ -­‐employed  workers  will  be  properly  recorded.  Goldberg  and  Pavcnik (2003)  estimate  informal  workers  represent  approximately  16%  of  Brazil’s  manufacturing  labor force  over  our  sample  period.  The  literature  on  the  impact  of  trade  reform  on  the  informal  sector offers  mixed  results  (see  Goldberg  and  Pavcnik  (2003),  Menezes-­‐Filho  and  Muendler  (2007),  and  Paz (2009)).

> 11   The   sector   classification   used   in   this   paper   comes   from   Brazil’s   statistical   office   ( _Instituto   Brasileiro de   Geografia   e   Estatística_ ,   IBGE)   and   is   roughly   comparable   to   a   3-­‐digit   NAICS   classification (Muendler   2002).

12  Muendler,  Poole,  Ramey  and  Wajnberg  (2004)  map  the  Brazilian  classification  of  occupations ( _Classificação  Brasileira  de  Ocupações_ (CBO))  to  the _International  Standard  Classification  of Occupations_ (ISCO).  The  CBO  is  a  detailed,  task-­‐oriented  classification  system,  while  ISCO  reflects  a less-­‐detailed  and  more  skill-­‐oriented  classification  system.  The  skill  classification  is  intended  to incorporate  on-­‐the-­‐job  experience,  informal  training,  and  the  technological  skill  content  of  the 7