Local Effects of Mineral Commodity Prices on Wages:

An Empirical Analysis for the States of Pará and Minas Gerais

Abstract

Although the relationship between the abundance of natural resources and economic development is widely discussed in the literature, few studies evaluate the phenomenon from the perspective of the local labor market. This study aims to evaluate the extent to which variations in mineral commodity prices are related to wages at the local level in the states of Pará and Minas Gerais. The empirical approach is based on spatial panels estimated for the period 2003-2019 and the sub-periods of boom (2003-2011) and bust (2011-2019) in mineral commodity prices. The results show that there are spillovers of prices on municipal wages in the two states, with this effect being higher for Pará. The analysis by sub-periods shows a spatiotemporal heterogeneity in the transmission mechanisms of price shocks on municipal wages. In the boom cycle, the transmission effects are positive and have similar intensity in both states. In the bust cycle, the transmission effects are significantly smaller. Spatial spillovers operate differently in each state, being determinants of this heterogeneity.