Education, Family Background and Racial Earnings Inequality in Brazil

This study combines survey data with annual state data on pupil-teacher ratios covering broadly the period 1940-90 to investigate the role of race, family background and education (both the quantity and quality) in explaining earnings inequality between whites and the African descendent population (pretos and pardos) in Brazil. We estimate quantile Mincer earnings equations to go beyond the usual racial average earnings gaps decompositions. Our main findings indicate that differences in human capital, including parental education and education quality, and in its returns, account for most but not all of the earnings gap between the African descendent population and whites. There is evidence of potential greater pay discrimination at the higher salary jobs at any given skill level. We also find that returns to education vary significantly across workers. The gradient of skin color, in itself, appears as a significant determinant of labor market performance, particularly in granting higher returns to human capital investments. While the labor market rewards the educational investments of pardos similar to those of white workers located at the top of the adjusted wage scale, pardos at the bottom are rewarded similar to pretos. Thus the common belief in Brazil that a better position in the socio-economic scale grants a fairer treatment in the labor market ("money whitens") may hold true only for pardos. The results suggest that while equalizing access to quality education, including improved early learning environments, is key to reduce inter-racial earnings inequality in Brazil, specific policies are also needed to facilitate non-whites equal access to good quality jobs