Second Advance of Research Project

“Analyzing wage gap in agricultural and energy sectors: a Heckscher-Ohlin perspective

on Brazil and Peru (2000-2019)”

International Economics
FC-PREENI06A01
Professor: Gonzales Taranco, Carlos

Members:

Lima – Perú

2024 – 01
 Abstract

This study analyzes the wage gap in the agricultural and energy sectors of Brazil and Peru

between 2000 and 2019, using the Heckscher-Ohlin model. A correlation analysis using the

Spearman and Pearson test was used to assess the relationship between private investment,

capital per capita, commodity prices (coffee and oil) and wages. The results show that there is

no positive correlation between investment and wages in the energy sector of Brazil, a

negative correlation between investment and wages in the agricultural sector of Peru.

Likewise, there is a positive and direct correlation between wages in the energy sector and oil

prices, and a positive correlation between coffee prices and wages in the agricultural sector of

Peru. This suggests that other factors, such as government policies and labor market

dynamics, are more influential. The research concludes that wage trends are determined by a

complex interaction of factors, highlighting the need for specific sectoral policies and

investment in education and vocational training to improve incomes and support sustainable

economic development in these sectors.

Keywords: Heckscher-Ohlin Model, wages, agriculture sector, energy sector, large

economy, small economy.

 Resumen

El presente estudio analiza la brecha salarial en los sectores agrícola y energético de Brasil y

Perú entre 2000 y 2019, utilizando el modelo de Heckscher-Ohlin. Se empleó un análisis de

correlación aplicando el test de Spearman y Pearson para evaluar la relación entre la

inversión privada, el capital per cápita, los precios de las materias primas (café y petróleo) y

los salarios. Los resultados muestran que no hay una correlación positiva entre la inversión y

los salarios en el sector energético de Brasil, una correlación negativa entre la inversión y los

salarios en el sector agrícola de Perú. Asimismo, hay una correlación positiva y directa entre

salarios en el sector energético y precios del petróleo, y una correlación positiva entre los

precios del café y los salarios en el sector agrícola de Perú. Esto sugiere que otros factores,

como las políticas gubernamentales y la dinámica del mercado laboral, son más influyentes.

La investigación concluye que las tendencias salariales están determinadas por una

interacción compleja de factores, destacando la necesidad de políticas sectoriales específicas

y la inversión en educación y formación profesional para mejorar los ingresos y apoyar el

desarrollo económico sostenible en estos sectores.

Palabras clave: Modelo de Heckscher-Ohlin, salarios, sector agrícola, sector energético,

economía grande, economía pequeña.

 Index

Introduction
Problem statement
Formulation of the problem.
Theoretical framework
Empirical evidence
Objectives
Method
Type, level, and focus of research.
Investigation design.
Operational design of variables.
Sample investigation.
Instruments and techniques.
Methodology
Results
Linear graphs of the study variables
Normality
Scatter plots of the study variables
Scatter plots according to study objectives
Correlation test
 Introduction

In Peru, the largest amount of the economy’s workforce is concentrated in the

agricultural sector; in 2021, with 4,702,349 workers, representing 27.5% of the total. When

analyzing the agricultural labor force, at the regional level, they are mainly concentrated in

Cusco, Cajamarca and Puno, with a sum of 26.6%, in the other hand, Madre de Dios, Tumbes

and Moquegua have the lowest number of workers, with a sum of 1.4%. Additionally, almost

two thirds of the agricultural workforce is concentrated in the Sierra region, with a sum of

54%. In the same year, approximately 2,243,000 Peruvian workers indicated that agriculture

is their main activity; this represents a rise of 23.1% compared to the previous year. Talking

about salaries, on average, the workers in agriculture obtain lesser payment compared to the

national aggregate. If we compare the agricultural sector with the other, we observe that their

workers earn the least; in 2020, the payment in the formality and informality, respectively,

amounted S/573 and S/1608 (Escuela de Gestión Pública de la Universidad del Pacífico,

2022). In Latin America, Brazil positions as the first place in the production of oil. In their

geographic zone, 97.6% of the oil production of the country is made offshore; Brazil has the

largest oil reserves in the world. (International Trade Administration, 2023).

According to Bourguignon and Morrisson (2002), in the first wave of globalization in

1992, the inequality in the world of personal income increased impressively in that time span.

More importantly, the rise in inequality between the countries drove a rise in the wage

inequality; explained by the faster increasing of the income per capita in rich countries

compared to poor countries, in other words, a wider gap of the income per capita between the

two kinds of countries.

Problem statement

The gap in wage levels between a large economy, represented by Brazil, and a small

economy, represented by Peru, over the period 2000-2019, using the Heckscher-Ohlin

theoretical framework. Brazil specializes in the production of capital-intensive energy

products such as oil (Mendes & Teixeira, 2018, p.70), while Peru specializes in labor-

intensive agricultural products such as coffee (Decreto Supremo N°017-2021, 2021, pp.45-

69).

This wage gap between large and small economies, such as Brazil and Peru

respectively, within the Heckscher-Ohlin theoretical framework, triggers a series of highly

relevant economic and social challenges. First, this gap contributes significantly to economic

inequality, both domestically and internationally. When workers in the small economy

receive significantly lower wages compared to workers in the large economy, income and

wealth gaps widen, which can generate social tensions and affect economic stability (Ewout,

2008).

In addition, this wage gap can act as an obstacle to social mobility (Lu, 2020). If

workers in the small economy have fewer opportunities to access higher wages compared to

workers in the large economy, it spreads cycles of poverty and limits the possibilities of

economic advancement for future generations. (Globalization, Labor Markets, And

Inequality, 2012) This not only affects people's individual well-being, but can also have

wider consequences for social cohesion and economic progress (Ambrus, 2017).

According to FasterCapital (2024), the wage gap can hinder growth efforts in an

economy, through low productivity resulting from disincentives, social cohesion between

social strata, and a limitation in purchasing power that affects the internal demand of certain

groups and therefore the development of some industries. Furthermore, other authors such as
Del Carpio (2018) point out that in small economies, low wages can discourage investment in

human capital and advanced technologies, which in turn limits long-term productivity and

competitiveness.

Previous studies have primarily focused on general aspects of economic inequality,

rather than examining specific wage effects related to the characteristics of economies of

different sizes and sectors. Therefore, more research is needed to investigate the wage gap

between large and small economies using the Heckscher-Ohlin model.

In this sense, this research seeks to make a comparative analysis of wages in Brazil

and Peru using the Heckscher-Ohlin model. Since this research focuses on the energy and

agricultural sectors, by the end of this work there could be a better understanding of how two

different types of economies work with respect to wages.

Formulation of the problem.

General question:

What is the relationship between the economic structure and factor endowments with

the wages of workers in the Peruvian agricultural sector and the Brazilian energy sector from

2000 to 2019?

Specific questions:

What is the relation between labor endowment in Peru's agricultural sector,

particularly in coffee production, with the variation of wages from 2000 to 2019?

What is the relation between capital investment in Brazil’s energy sector, considering

its capital-intensive nature and oil production, with the evolution of wages in that sector

between 2000 and 2019?

 Justification

The research on how factor endowments relate to wages in Peru and Brazil, within the

framework of the Heckscher-Ohlin model, is essential for a deeper understanding of the

global economy and international trade dynamics. According to this model, countries are

specialized in the creation and export of products that make intensive use of their most

abundant resources. As an example, Peru, with an abundance of labor, and Brazil, with an

abundance of capital, benefit by specializing in sectors that maximize the use of these

resources, such as agriculture and the energy sector, respectively.

Such specialization may lead to wage adjustments in each country based on the

predominant factor. The Heckscher-Ohlin theory highlights the close connection between

wages and a country’s productive specialization, related directly with wage levels based on

the factors of production involved in exported versus imported goods.

This study is significant because it shows how labor and capital are related to wage

levels in both countries between 2000 and 2019. This research focuses on expanding

knowledge and filling the existing research gap on the specialization and interaction of

factors with respect to wage differentials.

The results of this research allow for an analysis of the effectiveness and limitations of

the model in a real-world context, as well as an impact on practices for the formulation of fair

labor policies and inclusive economies in both countries.

The main beneficiaries of this study are academics, researchers and students interested in

global economics and labor policies, as well as local and multinational companies in the

agricultural and energy sectors operating in Peru and Brazil, who can take advantage of these

findings to improve their efficiency by aligning their operations with comparative advantages
of each country and competitiveness through strategies on hiring, training and compensation

based on wage differentials.

Theoretical framework

Empirical evidence

Matano & Naticchioni (2010) conducted a study to examine how international trades

affect the wages structure and the inequalities of Italian workers. The research employed a

non-experimental, quantitative approach, characterized as both explanatory and applied.

Their findings revealed that local trade significantly influences wage inequality. Local export

performance reduces wage inequality by benefiting manual workers, consistent with

Heckscher-Ohlin-Samuelson (HOS) predictions. Conversely, global trade, particularly

exports to developing countries, decreases inequality due to the advantages in producing

unskilled labor-intensive goods. However, imports from these countries increase inequality

by favoring skilled managerial employees. The study concluded that it is essential to consider

local comparative advantages within their specific diversification cones and in relation to

other cones. Exports to less developed countries increase wage inequality, as the HOS model

predicts. Additionally, trade affects employment in a way that aligns with its impact on

wages, indicating a cohesive understanding of trade's effect on the Italian labor market.

Gumpert (2016) carried out a study to investigate the emergence of regional

development disparities through variations and technological advancements. The research

employed an experimental and quantitative approach. The results reveal that rational

underdevelopment is influenced not only by wage subsidies but also by capital and mobile

factors. This research holds significant implications for economic policies designed to lessen

interregional inequality. The study concluded that rational underdevelopment is driven by

learning effects and the adoption of new technologies, leading to unequal development
between initially similar regions. Spillover effects allow advanced regions to adopt new

technologies, while financial transfers to less developed regions increase their income but

decrease their ability to implement new technologies. Although the movement of factors like

capital can diminish inequality by increasing industrial output in the North and reducing

financial transfers, the less developed region still struggles with lower productivity. Evidence

from the Mezzogiorno in Italy illustrates these dynamics, suggesting that although financial

transfers may stabilize, inequality persists.

Peeters and Vaal (2000) conducted research on globalization and wage inequality,

prominently incorporating theories from Heckscher-Ohlin, economic geography, and service

availability. Using a quantitative experimental approach, they found that the reduction in

transportation costs for producer services could have led to the significant increase in wage

inequality. Their numerical simulations indicate that the decline in transportation costs for

producer services contributed to the reduction in wages for low-skilled workers during the

1980s. While the initial liberalization of service markets negatively impacted these workers,

further reductions in transportation costs eventually benefited them. This suggests that low-

skilled workers could ultimately benefit from the increased globalization of service markets.

Additionally, the mobility of high-skilled labor and the local presence of service firms can

help mitigate the adverse effects of goods globalization on low-skilled workers.

Dash (2006) conducted research aimed at empirically exploring the relationship

between outsourcing services and human capital. The study drew on standard growth and

human capital literature, using a qualitative non-experimental methodology. The relationship

between outsourcing services and human capital was analyzed through the lens of

comparative advantage and factor ratios. The results indicated that the size of the labor force

with tertiary education is a crucial determinant of service exports, with adjusted R² values

above 0.8 and positive, significant coefficients for all three independent variables. The study
concluded that comparative advantage analysis based on population size and human capital

indicators can be misleading. Although India and China have low tertiary education

enrollment rates relative to their populations, they have a large absolute number of enrolled

students. Furthermore, cross-country analysis revealed that despite significant outsourcing

efforts by some Eastern bloc countries, their tertiary-educated labor force is relatively small.

Similarly, while Ireland excels in information technology, its educated workforce in this field

is small in absolute terms, limiting its overall market impact.

Wacker (2010) conducted a study to investigate the impact of trade with the EU-15 on

wages in the Czech Republic, Hungary, Poland, and Slovakia between 1997 and 2005. Using

an econometric methodology with a qualitative non-experimental approach, the research

found that definitive statements about this effect are challenging. The results showed that

although trade with the EU-15 may negatively affect earnings in the short term (1-2 years),

the impact turns beneficial in the intermediate to extended period, particularly for Hungary

and Poland. Despite real wages rising more in these countries compared to the EU-15,

substantial disparities in living standards continue to exist. Classical trade theory does not

fully explain this convergence, especially with the rise in exports of medium-high and high-

tech goods. Instead, the theory of increasing returns and the influence of multinational

corporations may provide a better explanation for these trade patterns, calling into question

the relevance of the Stolper—Samuelson theorem and the factor price equalization theory.

Odriozola (2022) conducted research to analyze the impact of trade liberalization on

wage and income disparity in developed and developing countries. This work employed a

quantitative methodology, which was supported using cross-sectional and panel data. The

cross-sectional analysis results reveal a direct correlation between trade liberalization and

wage disparity in both advanced and emerging economies. This is attributable to

technological changes that favor skilled workers. Finally, it is concluded that trade
liberalization helps reduce income inequality in both advanced and emerging economies.

Therefore, trade liberalization seems to hold significant implications for advancing the

Sustainable Development Goals. The inclusion of additional income sources like transfers

and capital income, alongside wages, in total household income, might explain the varying

outcomes observed in the analysis of wage and income inequality.

Carneiro & Arbache (2003), performed research on the impacts of trade on the labor

market in Brazil employing a CGE model methodology. Their study aimed to assess the

effects of trade liberalization on macroeconomic variables and labor market indicators in

Brazil. The research utilizes a methodology that functions as a versatile empirical simulation

tool to quantitatively evaluate the impacts of economic policies and external shocks on the

national economy. The key findings confirmed that liberalized trade improves economic

welfare by augmenting production, decreasing domestic prices, and increasing demand for

labor. Finally, it is concluded that the simulations conducted evaluated the effects of a general

tariff increase, an export promotion policy in skill-intensive sectors and a surge in

productivity across the economy. The results indicate that the capacity of trade liberalization

to enhance labor market outcomes in Brazil is restricted, contrary to the predictions of the

HOS theorem. Although liberalization contributes to economic welfare through increased

production and labor demand, the advantages typically favor the most skilled workers.

Hu, et.al (2008), conducted a study utilizing a two-country endogenous growth

framework where sustained expansion is propelled through the accumulation of both physical

and human capital. This research had a non-experimental approach. The results indicated that

in the interconnected global economy, there exists a balanced, stable, and singular growth

equilibrium, specific to each locality. They also found that integrating adjustment costs into

the human capital accumulation process results in a reduced long-term growth rate. We then

showed that, in a global economy comprising two countries engaged in international trade,
achieving balanced growth is feasible. Also introduced was a dynamic version of the

Heckscher-Ohlin theorem concerning the pattern of international trade. Finally, it was

concluded that adjustment costs diminish the long-run growth rate and that variations in the

effectiveness of human capital formation impact trade dynamics.

Raa & Chakraborty (1991) conducted research on India's comparative advantage

compared to Europe using linear programming to analyze the two economies. They

developed a customs union model for India and Europe to evaluate their respective

comparative advantages. The methodology of this research used a qualitative approach,

where the search of various sources was used to build a database for the empirical

implementation of the model. The results indicated that India's focus on mining,

manufacturing, and utilities could result in substantial efficiency gains, while the deregulation

of these sectors could enhance their appeal for investment. Finally, it was concluded that to

elevate income levels in India, it is crucial to eliminate investment controls in manufacturing,

which are hindering its potential due to government regulations. Although economic

openness benefits workers more than local capitalists, sectors such as agriculture,

transportation and services are inefficient and in need of significant technical change. While

adjustment costs remain elevated, resources will be more efficiently allocated to sectors

where India possesses a comparative edge.

Jakobsson (2016) conducted a study investigating the potential relationship between

trade openness and income inequality, aiming to discern whether increasing income

inequality might be linked to trade openness. The research employed a longitudinal non-

experimental quantitative methodology, analyzing quantitative data spanning several decades

(1960-1990). Measures of income inequality, such as the Gini index, and GDP-adjusted

indicators of trade openness were utilized. Regression analyses were carried out to explore

the association between trade openness and income inequality, while controlling for variables
such as the logarithm of GDP per capita, levels of education, democracy and rule of law

indices, as well as interaction variables and regional variations. The study's findings provided

evidence supporting the notion that trade openness influences income inequality in

developing nations. However, contrary to expectations, no evidence was found suggesting

that increased openness leads to heightened income inequality in developed countries;

instead, it indicated a decrease in inequality. Conversely, the results indicated that in

developing countries, trade openness was linked with an increase rather than a decrease in

income inequality. These outcomes suggest that the relationship between trade openness and

income inequality in developing countries is more intricate than initially presumed. While

hypothesis 1, proposing an impact of trade openness on income inequality, found support,

hypothesis 2 was contradicted. Instead of witnessing a decline in inequality in developing

nations, as anticipated, trade openness in these contexts was associated with a rise in income

inequality.

Carbajal (2019) conducted research on the Manufacturing Wage Gap: Mexico and the

United States, which has as its main objective to calculate the rate and extent of the wage gap

in the manufacturing sector for production and non-supervisory workers between Mexico and

the United States. Two complementary methodological approaches were employed in this

research. First, we used a synthetic panel approach and econometric analysis applied to

survey data. Second, descriptive statistics based on census data from the 1990s, 2000s and

2010s were used. The results showed that the analysis did not reveal evidence of long-run

convergence in factor prices during the period studied. It was argued that significant

macroeconomic events, such as the 1994 Mexican peso crisis, could have influenced these

contradictory results. From the review of the existing literature, it was concluded that the

wage gap between Mexico and the United States has not shown a significant reduction or a

clear convergence since the implementation of NAFTA. The lack of conclusive evidence
suggests that the expected wage convergence in the context of globalization has not

materialized as anticipated.

Busssolo (2002) made a research to analyze the main labor market regulation in Chile

and explore how they relate to trade policy. This work used empirical data and numerical

model simulations of trade reform proposals for the country. The results observed show that

trade reforms can have big effects on the economy, especially considering labor market

imperfections, and these effects are changes in wages, employment and sectoral adjustments.

Also, the work shows trade liberalization can complicate wage inequality. The effect varies

across sectors and regions, being influenced by the characteristics of the labor market. In

addition, this study delves into the particular adjustments of each sector following regional

trade agreements such as NAFTA or Mercosur. And, each sector responds differently to trade

liberalization, which impacts overall economic performance. Finally, it indicates that

interactions between labor market regulations and trade expansion may explain the increase

in the wage gap in Chile.

Lee (2017) made an investigation whose main objective was to identify the changes in

the inequality of wage in the Korean manufacture and which factors affected them in the last

30 years. The methodology used was a decomposition method, it was to inspect the variations

wages in the sector and between the sector, inside the Korean manufacture between the

period 1980-2012. The analytical results showed and confirmed that the variation of the wage

inside the sector explains a great part of the wage inequality. The result indicated that the

wage inequality inside the Korean manufacturing sector is impacted by labor market

conditions, technological change biased towards skills and international trade. Also, the

results indicated that around the mid-90’s there was an anatomical change in determinants of

wage inequality. Over the last 20 years, the international trade influence on wage dispersion

became more notorious.

 Adão (2015) carried out research whose main objective was to present a new

perspective on international trade to quantify the distributional effects. The Roy model was

used in the analysis; where the absolute advantage and comparative advantage is

heterogeneous for workers. The results indicated that the fall in wage inequality in Brazil in

the period 1991 and 2010 is represented by shocks in world prices of raw materials at a rate

of 5% and 10%. Finally, it was concluded that global demand shocks for commodities have a

distributional impact similar to that of tariff shocks. This analysis highlights the importance

of considering both comparative and absolute advantage to understand changes in wage

inequality, offering a flexible methodology applicable to various contexts of sectoral shocks.

Loebbing (2018), developed an investigation to analyze the impact of technical

change and automation on wage differentials in international trade patterns. The results

showed that it is possible to analyze technical change through the skills of the labor factor, it

means an increase in the relative supply of skilled workers stimulates the productivity of

capital, thereby increasing wage premia relative to their skills. Conversely, they also showed

that in a country with a skills' shortage it discourages improvements in the productivity of

capital, leading to low wages. This causes a reversal of the standard effects of the Heckscher-

Ohlin model with respect to predicting trade patterns based on relative factor endowments.

Finally, this investigation concluded that external effects such as firm-level technologies can

cause the induced improvements in capital factor productivity to be high, which outweigh the

direct negative effect on wage premiums as a countermeasure to the lack of qualified skills

within the Heckscher-Ohlin theoretical framework.

Bajona, C., & Kehoe, T. J. (2010), explains about trade, growth, and convergence in

the Hecksher-Ohlin dynamic model with its objective of evidencing through equations of

economic growth models about the convergence of income distribution in an open economy,

developing with intensive factors such as capital-labor. In his approach in an integrated

economy, some models he uses mainly is the Ventura´s model, but focused on the dynamic

model of Hecksher-Ohlin, comparing intensive factors and investment goods. The results

consider that the greater the free trade, the greater the profits for the countries, but there is a

greater divergence in the income of the countries. In his study, he considers that the

Hecksher-Ohlin model cannot measure some important factors in the pattern of trade.

Therefore, it is suggested that it is crucial to implement the use of differentiation in the labor

effectiveness of countries.

Jones (2014) developed a work that studies how the comparison between trade models

is affected by the magnitude of shocks that generate new equilibrium. This work used a

comparative static analysis to see how changes in good prices and factor endowments affect

equilibrium positions in international trade patterns. Also, the study used calculus techniques

to evaluate the models, with focus on the differences between them. The results show that in

the case of infinitesimal changes, the HO model does not consider the relevance of industry

or technological flexibility in determining factor prices, but these become significant in the

case of finite changes, and the model can adapt endogenously as production patterns change.

In addition, this work says that technological differences between goods, such as the factor of

substitution, become important when the economy specializes in the production of a single

good. Finally, this work shows that both models assess the classification of industries

according to their factor intensity, but it differs in how this affects the variation in wages. In

the Specific Factors model, an increase in the price of a good raises wages more if the good is

more labor intensive, while in the HO model, the wage increase decreases as the difference

between labor intensities widens.

Vale & De França (2017) conducted an investigation whose objective was to

cooperate in international trade discussion, to provide evidence that the diversification cones

model is strong when explaining the inequality in wages inside developing countries. The
work employed the application of a model that separates states of Brazil in two cones;

through the samples of 1997 and 2007 of eighteen manufacturing industries in a ISUR

econometric model. The wage inequality was measured between cones. The result showed

that for the model suitability the salary equation is key. It also showed that in the industries in

the years analyzed, the real wages inequality didn’t perform a relevant change in patterns.

Additionally, the results showed that, as the wage variation is larger, the correct estimation of

the 2-cone model is possible thanks to the addition of the wage equation. The investigation

concluded that for the sample, the 2-cone model is valid and effective when estimating the

wage inequality and forecasting how the development will direct inside industries with

differences in the intensity of the capital per labor ratio. It was also concluded and

demonstrated the sensibility of the estimations according to the exclusion of the wage

equation. The investigation concluded that there was not found a relevant change in patterns

of wage inequality of income in industrial labor from the cones.

Theory

Heckscher Ohlin Model

According to Krugman, et al. (2012), the Heckscher-Ohlin model says that differences

in the factor endowments of production, labor and capital, determine which products each

country is going to export or import (p.91). Taking into account Brazil and Peru specifically,

both countries have different endowments of capital and labor in their economic sectors. In

Brazil, the energy sector is capital intensive and in Peru, the agricultural sector is more labor-

intensive. So, according to the model, Brazil should export capital intensive products, such as

those in the energy sector, and Peru should export more labor-intensive goods, such as

agricultural products. This specialization influences wages in each sector, so sectors that use

the abundant factor more intensively, like capital in Brazil and labor in Peru, could have

higher wages.
 Wages

According to Krugman & Wellls (2009), wages are the amount of money given in

exchange to the workforce (p.210). In addition, they describe that wages can be charged by

time frequency, such as per hour, per day, per week or per unit of work performed and these

are crucial production factors because they are part of the cost of companies, and are key to

optimizing their profits.

Wages in the agricultural sector of Peru:

Peru is a country that stands out for its agricultural production, with coffee being the

second most important agricultural export product of Peru. According to Comex (2022), in

2022 Coffee exportation generated US$ 1,234 million, which is equivalent to approximately

8.5% of agricultural GDP (p.7) It has also contributed significantly to generate employment

and income for more than 2 million people, mainly in rural areas.

In relation to labor, as production is centered in rural areas, the labor force has a lot of

people and tends to be low-skilled and receives relatively low wages, and wages are volatile

due to seasonality and constant climatic changes.

On the other hand, international prices influence the ability to pay in the Peruvian

coffee sector. According to National Coffee Board (2022), state that when international

coffee prices are high, coffee growers obtain higher incomes and can invest in better-paid

labor, directly impacting wages (p.20). That is, wages are prone to international market

volatility.

In addition, salaries are subject to rural development programs. According to

CONAVIDA (2020), in Peru various programs are implemented with the aim of boosting

productivity, employment and improving the quality of coffee. One of the most important

programs are: “Sierra Exportadora Program” and “National Coffee and Cocoa Program”.
 Wages in the energy sector of Brazil:

Brazil is renowned for its oil production and stands as the world's third-largest crude

oil exporter, trailing behind Saudi Arabia and Russia. According to Mordor Intelligence

(2024), Brazil's daily oil production amounted to 3.7 million barrels and 131,325 thousand

cubic meters (parr.6). Also, according to OEC (2022), in 2022 Brazil exported $12.9MM in

refined oil. Brazil has this great production and export capacity because it presents great oil

development technologies, causing the expansion of production in the pre-salt and the

growing demand for energy, which allows them to work on 30 oil projects a year by 2023.

This generates great employment opportunities.

Wages in Brazil's oil sector are higher than the national average. According to

Bnamericas (2013), Brazil's salary is the best with an average permanent salary for a national

employee in the industry was US$111,000, higher than Argentina with US$94,200, Colombia

with an average pay of US$81,700, Venezuela with average salaries of US$66,200 and

Mexico with an average salary of US$50,000 (parr.1).

This high amount of wages per year is because workers are specialized, well

educated and experienced in areas such as safety, environmental management and oil

regulations. In other words, in Brazil, there is a high demand for skilled labor and a low labor

supply. According to Saltiel.etl(2017), wages of oil workers in Brazil increased significantly

between 2010 and 2015 to attract new workers (p.8). This high qualification of Brazilian

labor generates efficient productivity, profitability and consequently high wages.

Exports

Exports are the transfer of goods from one country to another outside the borders.

According to Krugman, et al. (2012) explains that exports are the shipment of good from a

country that specializes in this good due to having a comparative advantage in production
compared to other countries (p.25). In addition, the increase in exports generates an

improvement in the economic growth and social well-being of a country.

Labor
According to Harvey (1980), labor refers to the work people do, with their bodies and

their minds, to make things. It’s not just about getting paid, how people feel about their jobs

and their loyalty to their employers also play a big role (p. 176).

Labor demand

According to Sapsford & Tzannatos (1993), labor demand is the number that

businesses want to hire at a given wage and within a given time period. It’s about needing

workers to help make goods or provide services (p.109).

Labor supply

According to Sapsford & Tzannatos (1993), labor supply refers to the total number of

work hours available for hire within a given time frame. It depends on factors like the size of

the labor force available, including those who actively seek employment, and the willingness

of individuals to offer their time for work once they are part of the labor force (p. 7).

Capital

According to Hall (2023), capital includes assets like physical tools, plants, and

equipment that improve work productivity. The utilization of these leads to increased

productivity (par. 1).

Objectives

General objective:
 A comparative analysis between the economic structure and factor endowment with

workers' wages in the agricultural and energy sector of Peru and Brazil from 2000 to 2019.

Specific objectives:

A comparative analysis between labor endowment in Peru's agricultural sector,

focusing on coffee production, with the variation of wages from 2000 to 2019.

A comparative analysis between capital investment in Brazil’s energy sector, given its

capital-intensive nature and oil production, with the evolution of wages in that sector between

2000 and 2019.

Method

Type, level, and focus of research.

This investigation is quantitative as it focuses on gathering, processing, and analyzing

numerical data related to predefined variables (Dominguez, 2007). It will be based on the

collection and analysis of numerical and statistical data related with the wage disparities in

the agriculture and energetic sectors in Peru and Brazil during the period of 2000-2019.

Furthermore, this research is basic, because it is oriented to systematically acquire new

knowledge, with the sole purpose of increasing the understanding of a specific reality

(Álvarez, 2020). This investigation aims to deepen the theoretical and conceptual

understanding of wage disparities in the agricultural and energy sectors of Brazil and Peru.

Investigation design.

In the present investigation, a longitudinal quantitative design will be used since it

focuses on analyzing the evolution or variation of one or several variables, as well as the

interactions between them (Agundelo et al., 2008). For example, it could be said that there
are significant changes and trends in wage disparities between agricultural and energy sectors

over the period 2000-2019.

The design proposed for this research is characterized as a trend design because it

aims to observe and analyze changes in wage disparities over time by collecting and

comparing data from different points within the specified period.

Operational design of variables.

Table 1.
Conceptual definition of variables

Variables Conceptual Definition Measurement Abbreviation

Capital per capital It refers to the financial It is measured in US CPCA

in the agriculture resources allocated to dollars
sector of Perú agricultural activities, from
public investment in
infrastructure to private
investment in technology.

Private It refers to the financial It is measured in terms PIPA

investment in the resources allocated to of Perú’s GDP
agriculture agricultural activities, from
industry public investment in
infrastructure to private
investment in technology.

Capital per capital It refers to the total financial It is measured in US CPCE

in the energy resources dedicated to dollars
sector of Brazil energy production,
infrastructure, and
development.

Private It refers to the total financial It's measured in terms PIBE

investment in the resources dedicated to of Brazil's GDP
energy industry energy production,
infrastructure, and
development.

Brazilian Oil This refers to the price of It is measured in US OP

price Brazilian crude oil in the dollars per barrel
international market.

Peruvian Coffee This refers to the price of It is measured in US CP

price Peruvian coffee beans in the dollars per ton
international market.

Wages in the This refers to the It is measured in US WE

energy sector compensation paid to dollars per monthly
Brazilian workers involved salary
in the production and
distribution of energy
resources.

Wages in the This refers to the It is measured in US WA

agricultural sector compensation paid to dollars per monthly
peruvian workers engaged in salary
agricultural activities

Number of It refers to the total number It is measured in terms NWO

workers in the of individuals employed in of the total numbers of
Brazilian energy the Brazilian energy sector. Brazil’s workers
sector

Number of It refers to the total number It is measured in terms NWA

workers in the of individuals employed in of the total numbers of
Peruvian the Peruvian agricultural Peru’s workers
agricultural sector sector.

Sample investigation.

An intentional sample will be used that covers the years 2000 to 2019, composed of 4
variables and 19 observations, all belonging to the national and foreign territory.

Instruments and techniques.

Tabla 2.
Instruments and techniques

Instruments Description

Official Economic Data Base National and international economic databases

will be used to collect data on salaries, sectoral
production, international trade and other relevant
indicators. Trusted data resources such as The
World Bank, INEI, BCRP, BCB, IBGE, MTPE,
MEF, CEMPRE

Statistical Analysis Software Statistical programs will be used to analyze the

quantitative data collected. These programs will
allow for descriptive analysis, hypothesis
testing, and econometric modeling to examine
relationships between variables and identify
significant patterns.

-Stata16 Specialized software for econometric data

analysis

Documental Resources Academic documents, government reports, labor

policies, official statistics and other written
 sources related to the economy, labor market
and sectoral specialization in Brazil and Peru
will be collected and reviewed.

Techniques Description Justification

Correlation Analysis Correlation analysis is a Correlation analysis is useful

statistical method used to for identifying and evaluating
determine the strength and the relationships between wage
direction of the relationship differences and other variables
between two variables. It in the agricultural and energy
measures how changes in one sectors in Brazil and Peru. By
variable are associated with examining the correlation
changes in another variable, coefficients, one can determine
often using Pearson's the degree to which wage
correlation coefficient for differences in these sectors are
linear relationships. However, related, considering temporal
when the relationship between variations and differences
the variables is not linear, between countries and sectors.
Spearman's rank correlation This analysis helps to highlight
coefficient can be used. significant associations that
might inform further, more
detailed studies or policy
decisions.

Methodology

When implementing the operationalization, the obtaining of information about our

variables through documentary resources followed the next methodology. The analysis is
carried out with an identification and meticulous selection of documents; considering the
PRISMA declaration, that allows the transparent documentation in the investigation. First, the
focus was on the wage gap in both the agricultural and energy sectors. Then, as keywords, it
was used “wage gap in agriculture sector” and “wage gap in energy sector”. It was only
considered government reports, official government data/statistics and academic reports;
prioritizing documents in Spanish and English, and excluding different languages. Then, it
was only considered information that analyzes the cases of Perú and Brazil in the period
2000-2019.
 Results

Linear graphs of the study variables

Figure 1
Coffee price line graph

Note: Own work.

The graph below illustrates coffee prices from 2000 to 2019, with all values converted

by the natural logarithm to visualize percentage changes. From 2000 to 2011, coffee prices

increased exponentially. They represent a tremendous percentage rise arising from reasons

attached to global supply and demand, besides prevailing weather conditions. There are

significant fluctuations following from the figures after 2011; e.g., an increase of one unit in

the log of the price equals about 2.718-fold in the practical price, and a decrease of 0.5 in the

log makes it possible to envision a decline of 39%.

Figure 2
Oil price line graph

Note: Own work.

The graph below shows the development of oil prices during 2000–2019 in natural

logarithm values. From 2000 to around 2010, oil prices grew exponentially, with a very high

percentage of growth being shown. This was mainly due to changing global supply-demand

dynamics and a change in geopolitical factors. After 2010, there is significant volatility; for

example, a drop from 4.5 to 4 in the logarithm implies a 39% decrease in actual prices.

Figure 3
Private Investment in the Peruvian Agriculture line graph
Note: Own work.

The graph indicates the decreasing tendency of private investment in US$ in

agriculture from 2000 to 2019 in Peru. There was a sharp decline from 2000 to 2005, some

fluctuation from 2005 to 2010, followed the decreasing trend till 2019, but at the lowest level

over the whole period. This means significant challenges in mobilizing private capital into the

agricultural sector over these two decades.

Figure 4
Private Investment in the Brazilian Energy line graph
Note: Own work.

The following chart shows the private investment in US dollars, including those in the

Brazilian energy segment, from 2000 to 2019. Private investment is highly volatile, featuring

significant peaks in 2005, 2010, 2012, and 2019, with substantial crests and sharp declines

around 2013 and 2015. That means the economic scenario fluctuated, and investor confidence

was variable over this period.

Figure 5
Number of workers in the agriculture sector of Peru line graph
Note: Own work.

The graph above reflects the percentage of total workers in Peru's agricultural sector

from 2000 to 2019. Overall, there is a noticeable decline, but mainly from 2000 to 2010,

showing a shift from the industry. This has slowed down after 2010 and exhibited small

swings in both directions. By 2019, employment in agriculture as a share of total employment

will have substantially declined.

Figure 6
Number of workers in the energy sector of Brazil line graph
Note: Own work.

Total workers employed in the Brazilian energy sector from the year 2000 up to the

year 2019 have been accounted for in percentage. The percentage increased steadily from the

year 2000 up to around 2013, whereby it suddenly dropped in the rate, which continued to

fall until the year 2019. An increase is shown in the employment share in the energy sector,

but a critical reduction happens afterward.

Figure 7

Wages in the agriculture sector of Peru line graph

Note: Own work.

The graph shows the logarithm of wages in Peru's agricultural sector from 2000 to
2019. Wages grew exponentially from 2000 to 2010, peaked around 2010, and then slightly
declined from 2011 to 2015. After 2015, wages stabilized and showed a gradual increase
towards 2019.

Figure 8
Wages in the energy sector of Brazil line graph

Note: Own work.

 The graph shows the logarithm of wages in Brazil's energy sector from 2000 to 2019.
Wages decline from 2000 to 2005, rise exponentially to a peak around 2010, and then decline
with fluctuations from 2010 to 2019. This indicates initial wage decrease, significant growth,
and subsequent volatility.

Figure 9
Capital per capita of the agriculture sector line graph

Note: Own work.

The graph shows the logarithm of capital per capita in Peru's agriculture sector from
2000 to 2019. From 2000 to 2010, capital per capita is relatively stable, with some
fluctuations. It peaks around 2010, then declines significantly after 2012, reaching the lowest
point by 2019. This indicates a major reduction in investment per worker in the agricultural
sector.

Figure 10

Capital per capita of the energy sector line graph

Note: Own work.

The following is a graph of the log of capital per capita in Brazil's energy sector in the
2000-2019. There is a noticeable variation in capital per capita, with high peaks around 2005,
2010, and 2013 and sharp declines around 2003, 2008, and after 2013. In essence, the graph
shows that there has been high volatility in investment per worker in the energy sector.

Normality

Shapiro - wilk

Table 1

Shapiro-Wilk Test of Coffee Price

Note: Own work.

The Shapiro-Wilk test shows that coffee prices follow a normal distribution because
its p-value is 0.22353 which is greater than 0.05.
Figure 11

Histogram of Coffee Price

Note: Own work.

The following histogram of the coffee price histogram is evident from a normal

distribution, as symmetry is observed around the mean (μ) which is 7.50. In addition,

unimodal characteristics and asymptotes are observed, as the curve approaches the horizontal

axis when it moves away from the mean.

Table 2

Shapiro-Wilk test of Oil Price

Note: Own work.

The Shapiro-Wilk test shows that oil prices follow a normal distribution because its p-
value is 0.30452 which is greater than 0.05.
Figure 12

Histogram of Oil Price

Note: Own work.

The following histogram of the Oil price histogram is evident from a normal

distribution, as symmetry is observed around the mean (μ) which is 3.50. In addition,

unimodal characteristics and asymptotes are observed, as the curve approaches the horizontal

axis when it moves away from the mean.

Table 3

Shapiro-Wilk of Private Investment in the Peruvian Agriculture

Note: Own work.

The Shapiro-Wilk test shows that Private Investment in Peruvian Agriculture follows
a normal distribution because its p-value is 0.49979 which is greater than 0.05.
Figure 13

Histogram of Private Investment in the Peruvian Agriculture

Note: Own work.

The following histogram of Investment in Peru Agriculture is evident from a normal

distribution, as symmetry is observed around the mean (μ) which is 0.015. In addition,

unimodal characteristics and asymptotes are observed, as the curve approaches the horizontal

axis when it moves away from the mean.

Table 3

Shapiro-Wilk of Private Investment in the Brazilian Energy

Note: Own work.

The Shapiro-Wilk test shows that Private Investment in Brazil energy does not have a
normal distribution because its p-value is 0.02199 which is lower than 0.05.
Figure 14

Histogram of Private Investment in the Brazilian Energy

Note: Own work.

The following histogram of Investment in Brazil Energy is evident a normal

distribution, as symmetry is observed around the mean (μ) which is 0.015. In addition,

unimodal characteristics and asymptotes are observed, as the curve approaches the horizontal

axis when it moves away from the mean.

Table 4

Shapiro-Wilk test of Number of workers in the agriculture sector of Peru

Note: Own work.

The Shapiro-Wilk test shows the Number of workers in the agriculture sector of Peru
does not follow a normal distribution because its p-value is 0.00362 which is lower than 0.05.

Figure 15
Histogram of Number of workers in the agriculture sector of Peru

Note: Own work.

The following histogram of the price of the number of workers in the agriculture

sector of Peru shows that it does not have a normal distribution, as it shows a skewness to the

right, the peak displaced from the mean and the asymmetric slope of the curve.

Table 5

Shapiro-Wilk test of Number of workers in the energy sector of Brazil

Note: Own work.

The Shapiro-Wilk test shows the Number of workers in the energy sector of Brazil
follow a normal distribution because its p-value is 0.12341 which is lower than 0.05.

Figure 16

Histogram of Number of workers in the energy sector of Brazil

Note: Own work.

The following histogram of Investment in Brazil Energy is evident a normal

distribution, as symmetry is observed around the mean (μ) which is 0.03 distributed on both

sides of this value. In addition, unimodal characteristics and asymptotes are observed, as the

curve approaches the horizontal axis when it moves away from the mean.

Table 6

Shapiro-Wilk test of Wages in the agricultural sector

Note: Own work.

The Shapiro-Wilk test shows the Number of Wages in the agricultural sector does not
follow a normal distribution because its p-value is 0.01601 which is greater than 0.05.

Figure 17

Histogram of Wages in the agricultural sector

Note: Own work.

The following histogram of the Wages in the agriculture sector of Peru shows that it

does not have a normal distribution, as it shows a skewness to the right, the peak displaced

from the mean and the asymmetric slope of the curve.

Table 7

Shapiro-Wilk test of Wages in the energy sector of Brazil

Note: Own work.

The Shapiro-Wilk test shows the Number of Wages in the energy sector of Brazil
does follow a normal distribution because its p-value is 0.18283 which is greater than 0.05.

Figure 18

Histogram of Wages in the energy sector of Brazil

Note: Own work.

The following histogram of the price of the wages in the agriculture sector of Brazil

shows that it does not have a normal distribution, as it shows a skewness to the right, the peak

displaced from the mean and the asymmetric slope of the curve.

Table 8

Shapiro-Wilk test of Capital per capita of the agriculture sector

Note: Own work.

The Shapiro-Wilk test shows the Number of Capital per capita of the agriculture

sector of Peru follows a normal distribution because its p-value is 0.13229 which is greater

than 0.05.

Figure 19

Histogram of Capital per capita of the agriculture sector

Note: Own work.

Table 9

Shapiro-Wilk test of Capital per capita of the energy sector

Note: Own work.

The Shapiro-Wilk test shows the Capital per capita of the energy sector of Brazil

follows a normal distribution because its p-value is 0.79632 which is greater than 0.05.

Figure 20

Histogram of Capital per capita of the energy sector

Note: Own work.

The following histogram of Capital per capita of Energy sector is evident a normal

distribution, as symmetry is observed around the mean (μ) which is 11 and distributed on

both sides of this value. In addition, unimodal characteristics and asymptotes are observed, as

the curve approaches the horizontal axis when it moves away from the mean.

Correlation Tests

Pearson Correlation Test.

The Pearson correlation test is used when both variables have a normal distribution.
This test measures the strength and direction of the linear relationship between two
continuous variables. The Pearson correlation coefficient (r) can range from -1 to 1, where:

r= 1: Perfect positive correlation

r= -1: Perfect negative correlation

r= 0: No correlation

To determine if the variables are correlated, the P-value is evaluated:

P_value > 0.05: No correlation

 P_value < 0.05: Correlation exists

Table 10

Pearson's correlation between Wages in the Agriculture Sector of Peru and Private
investment in the agriculture industry

Note: Own work.

In the Pearson correlation test, it is evident that the p-value (0.000) is less than 0.05,

so there is correlation between the variables. However, the value of 0.8708 is a negative

value, which means that the correlation is negative and indirect.

Figure 26

Scatter line graph between Wages in the agricultural sector and Private investment in the
agriculture industry
Note: Own work.

Table 11
Pearson's correlation between Wages in the Agriculture Sector of Peru and Coffee Price

Note: Own work.

In the Pearson correlation test, it is evident that the p-value (0.000) is less than 0.05,
so there is correlation between the variables. In addition, the value of 0.9057 being a positive
value would mean that the correlation is positive and direct.

Figure 27
Scatter line graph between Wages in the Agriculture Sector of Peru and Coffee Price

Note: Own work.

Table 12
Pearson's correlation between Private investment in the agriculture industry and Coffee
Price

Note: Own work.

In the Pearson correlation test, it is evident that the p-value (0.0001) is less than 0.05,
which means that there is a correlation. In addition, the value of 0.7706 is a negative value,
which means that the correlation is negative and indirect.

Figure 28

Scatter line graph between Private Investment in the Peruvian Agriculture and Coffee Price
Note: Own work.

Table 13
Pearson's correlation between Wages in the energy sector of Brazil and Oil Price

Note: Own work.

In the Pearson correlation test, it is shown that the p-value (0.0015) is less than 0.05,
so there is correlation between the variables. In addition, the value of 0.6601 being a positive
value would mean that the correlation is positive and direct.

Figure 29

Scatter line graph between Wages in the energy sector of Brazil and Oil price
Note: Own work.

Table 14

Pearson's correlation between Wages in the energy sector and Number of workers in the
energy sector of Brazil

Note: Own work.

In the Pearson correlation test, it is evident that the p-value (0.0006) is less than 0.05,
so there is correlation between the variables. In addition, the value of 0.6988 being a positive
value would mean that the correlation is positive and direct.

Figure 30

Scatter line graph between Wages in the energy sector of Brazil and Number of workers in
the energy sector of Brazil
Note: Own work.

Table 15

Pearson's correlation between Number of workers in the energy sector of Brazil and Oil
Price

Note: Own work.

In the Pearson correlation test, it is evident that the p-value (0.0031) is less than 0.05,
so there is correlation between the variables. In addition, the value of 0.6261 being a positive
value would mean that the correlation is positive and direct.

Figure 31

Scatter line graph between Number of workers in the Energy sector of Brazil

and Oil price

Note: Own work.

Table 16

Pearson's correlation between Capital per capita of the agriculture sector and Wages in the
Agriculture Sector of Peru

Note: Own work.

In the Pearson correlation test, it is evident that the p-value (0.5449) is more than

0.05, so there is no correlation between the variables. However, the value of 0.7706 is a

negative value, which means that the correlation is negative and indirect.

Figure 32
Scatter line graph between Capital per capita of the agriculture sector and Wages in the
Agriculture Sector of Peru

Note: Own work.

Table 17

Pearson's correlation between Capital per capita of the energy sector and Wages in the
energy sector of Brazil

Note: Own work.

In the Pearson correlation test, it is evident that the p-value (0.0002) is less than 0.05,

so there is correlation between the variables. In addition, the value of 0.7330 being a positive

value would mean that the correlation is positive and direct.

Figure 33
Scatter line graph between Capital per capita of the energy sector and Wages in the energy
sector of Brazil

Note: Own work.

Spearman Correlation Test.

The Spearman correlation test is used when one or both variables do not have a
normal distribution. This test does not require the variables to have a linear relationship, but
instead evaluates the monotonic relationship between them. The Spearman correlation
coefficient (ρ) also ranges from -1 to 1, similar to the Pearson coefficient.

To determine if the variables are correlated, the P-value is evaluated:

P_value > 0.05: No correlation

P_value < 0.05: Correlation exists

Table 12

Spearman's correlation between Wages in the Agriculture Sector of Peru and Number of
workers in the agriculture sector of Peru
Note: Own work.

Through the Spearman correlation test, it is shown that the t probabilities are less than
0.05 that means that they are correlated, and the rho value (0.8902) is negative so it has a
negative correlation.

Figure 34

Scatter line graph between Wages in the Agriculture Sector of Peru and Number of workers
in the agriculture sector of Peru

Note: Own work.

Table 19

Spearman's correlation between Private Investment in the Peruvian Agriculture and Number
of workers in the agriculture sector of Peru
Note: Own work.

In Spearman's correlation test, it is evident that the t-probabilities (0.000) are less than
0.05, so there is a correlation. However, the rho value (0.8997) is positive, so it determines
that it has a positive and direct correlation.

Figure 35

Scatter line graph between Private investment in the agriculture industry and Number of
workers in the agriculture sector of Peru

Note: Own work.

Table 20

Spearman's correlation between Number of workers in the Agriculture Sector of Peru and
Coffee Price
Note: Own work.

In Spearman's correlation test, it is shown that the t-probability is less than 0.05 which
means that there is correlation and the rho value (0.7038) is negative so it has a negative
indirect correlation.

Figure 36

Scatter line graph between Number of workers in the agriculture sector of Peru and Coffee
Price

Note: Own work.

Table 21

Spearman's correlation between Wages in the Energy Sector of Brazil and Private
Investment in the energy sector of Brazil
Note: Own work.

In Spearman's correlation test, it is shown that the t-probability (0.5144) is more than
0.05 which means that there is no correlation and the rho value (0.1549) is positive so it has a
positive direct correlation.

Figure 37

Scatter line graph between Wages in the energy sector of Brazil and Private Investment in
the Brazilian Energy

Note: Own work.

Table 22

Spearman's correlation between Private Investment in the energy sector of Brazil and Oil
Price

Note: Own work.

In Spearman's correlation test, it is noted that the t-probability (0.9348) is greater than
0.05 which means that these variables are not correlated. Also, the rho value (0.0195) is
positive, so it has a positive and direct correlation.
Figure 38

Scatter line graph between Private investment in the Brazilian Energy and Oil price

Note: Own work.

Table 23

Spearman's correlation between Private Investment in the energy sector of Brazil and
Number of workers in the Oil Sector

Note: Own work.

In Spearman's correlation test, it is shown that the t-probability (0.6045) is more than
0.05 which means that there is no correlation and the rho value (-0.1233) is negative so it has
a negative indirect correlation.

Figure 39

Scatter line graph between Private investment in the Brazilian Energy and Number of
workers in the Energy sector of Brazil
Note: Own work.
 Conclusions

In the agriculture sector of Peru, there was found a significant negative correlation (-
0.8708) between wages and private investment, this indicates that if private investment
increases, wages in the agriculture sector would decline. One of the possible explanations is
the substitution of labor by technology and mechanization, which, despite increasing
productivity, allowed less dependence on intensive labor. In addition, there was a very
significant positive correlation (0.9057) between wages in the agriculture sector and the price
of coffee. On the other hand, private investment in the agriculture sector showed a significant
negative correlation (-0.7706) with the price of coffee, suggesting improvements in efficiency
and productivity costs and international coffee prices. So, these findings are consistent with
the Heckscher Ohlin model, which says that countries specialize in the production of goods
that intensively use their most abundant factor of production. In the case of Peru, the labor-
intensive agriculture sector is highly influenced by international coffee prices and investment
in technology.

In Brazil’s energy sector, a significant positive correlation (0.6601) was identified

between wages and the price of oil. This means that as oil prices increase, so do wages in the
energy sector, which shows that these wages are dependent on the variation in the sector's
income derived from international oil prices. Likewise, a significant positive correlation
(0.6988) was found between wages and the number of workers in the energy sector. This
suggests that the wage increase is due to the increase in demand for skilled labor in the
capital intensive energy sector. In addition, a significant positive correlation (0.6350) was
identified between the number of workers in the energy sector and the price of oil, indicating
that higher oil prices encourage the expansion of extraction and production activities, thus
increasing employment in the sector. These are also aligned with the theory which mentions
that capital intensive sectors, such as energy in Brazil, will have higher wages due to higher
returns on capital and the demand for skilled labor.

The relation between the factor endowments and wages in Peru show important
differences in economic and employment terms. Farmers in Peru, particularly in coffee
production, enjoy a large amount of labor. With a large number of workers available, wages
must decrease, especially in low pay and undeclared work. Although employment in the
agriculture sector has increased, pay has not increased too. In addition, the graphs and scatter
plots indicate a correlation between the two factors of employment and fluctuating wages. As
a result, Peru’s agricultural economy, which is mainly based on the export of primary
products, does not leave many opportunities for value addition and does not contribute to
wage increases. However, economic policies that can promote industrialization and training
can change this situation, and then wages in the sector will also increase.

In the case of Brazil, the situation in the energy sector is significantly different due to
the high capital intensity. The high return in terms of technology and machinery resulted in
high productivity and high wages, which is also confirmed by the support of the correlation
test and scatter plots. Moreover, this economic difference does not only affect these countries,
but also international trade and competition. For instance, countries with capital intensive
sectors such as Brazil will have an advantage in negotiations and a greater impact on other
foreign markets.

Differences in factor endowments also have an impact on social mobility and

economic stability. In Peru, the low wages offered by agriculture companies prevent workers
from changing careers and achieving economic stability. While this lack of access to
economic mobility ensures a steady supply of cheap and disadvantaged labor, it maintains
generational poverty and inequality. The lack of access to education and resources maintains
this situation, which is a real problem for families in future generations. Then, in Brazil, high
payment rates in the energy sector are closely linked to the potential growth of social
mobility.

Recommendations

This study suggests recommendations, for instance, for Peru it recommends

promoting economic policies that boost industrialization and training to add value to its
agriculture products and increase wages in this sector. This includes increasing investment in
education and technical development to improve productivity and wage conditions in
agriculture. In the case of Brazil, the recommendations can focus on further developing its
energy sector by investing in advanced technology and training skilled labor. This will allow
it to maintain high productivity and high wages by taking advantage of its comparative
advantage in energy resources. It is also suggested to implement policies to diversify the
economy and reduce dependence on the energy sector, which will reduce risks associated
with oil price volatility and foster greater economic equity in other sectors.
 For future research, it is recommended to expand the analysis of Peru and Brazil’s
comparative advantages, especially in key sectors such as agriculture and energy, by
exploring how these advantages can be optimized through strategic economic and trade
policies. Furthermore, it is important to see how investment in technology and education can
increase productivity and competitiveness. Also, research on policies that promote
sustainable and equitable growth, reducing inequality and improving quality of life, can
provide essential information. Finally, conducting a comparative analysis with other
developing countries with similar resources will allow researchers to identify best practices
and areas for improvement for the economic development of both countries.
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