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Jorge Alvarez, Felipe Benguria, Niklas Engbom, and Christian Moser

1 Introduction Since the mid-1990s, Brazil has experienced a large reduction in earnings inequality resembling the experience of other Latin American economies during this period. This decrease in earnings inequality stands in stark contrast to that of the US and many developed countries, which saw inequality steadily increasing over the past two decades. 1 This paper studies the sources of this decrease. To this end, we exploit a large administrative linked employer-employee dataset containing information on hundreds of millions of job spells between