In this paper, we investigate the dynamics of labor adjustment at the rm level in

Brazilian manufacturing, using information on average hours per worker to measure

employment deviation from desired levels as in Caballero et al. (1997). We use Brazilian

manufacturing data at the establishment level and monthly frequency. The objective is

to estimate the employment adjustment function, which relates the magnitude of em-

ployment changes to the size of employment gaps. The empirical results point to the

presence of nonconvexities in employment adjustment costs in Brazilian manufacturing,

with estimated employment adjustment rates increasing with the size of employment

gaps. On average, employment adjustment rates range from 10% for small employment

gaps to 35% for large ones. The results also show that there is a large proportion of

rms in the sample that do not adjust employment over two consecutive periods. We

run several robustness tests with alternative ways of estimating the employment gaps,

using other forms of dealing with measurement error and a problem of endogeneity of the

hours change variable. Although the magnitudes of employment adjustment rates vary,

we show that: i) the variations are in line with the expected directions of the biases in

estimating the coecient of the hours change variable; and ii) the format of employment

adjustment functions does not change across specications, always revealing that employ-

ment adjustment rates increase with the size of employment gaps, which is compatible

with nonconvex costs of employment adjustment. We also study how the employment

adjustment function varies according to several establishment characteristics, such as

skilled-labor intensity, size, payroll expenses, and overtime payments. We show that the

employment adjustment function tends to have a higher mean and to display larger val-

ues when measured for establishments with characteristics that are arguably related to

lower costs of employment adjustment: larger proportion of low-skilled workers, smaller

size and lower overtime payments.

This paper uses publicly released audit reports to study the effects of disclosing information about corruption practices on electoral accountability. In 2003, as part of an anticorruption program, Brazil's federal government began to select municipalities at random to audit their expenditures of federally transferred funds. The findings of these audits were then made publicly available and disseminated to media sources. Using a data set on corruption constructed from the audit reports, we compare the electoral outcomes of municipalities audited before versus after the 2004 elections, with the same levels of reported corruption. We show that the release of the audit outcomes had a significant impact on incumbents' electoral performance, and that these effects were more pronounced in municipalities where local radio was present to divulge the information. Our findings highlight the value of having a more informed electorate and the role played by local media in enhancing political selection.