Beyond the low-skill equilibrium? A case study of the local content policy in the Brazilian oil and gas industry

Abstract

This master thesis wishes to explore the labor market in the Brazilian oil and gas industry during the peak years of the oil boom, seen from Norwegian multinational companies (MNC) point of view. The theoretical perspective applied in the analysis is the hierarchical market economy (HME) typology, deriving from the varieties of capitalism (VOC) framework. In HMEs, the low-skill equilibrium is a prominent feature, in which none of the actors involved has incentives to invest in education and vocational training. This case study investigates to which extent such equilibrium exists in the Brazilian oil and gas industry. The industry is treated as a deviant case, due to factors like the national oil company Petrobras efforts to raise the human capital, and the intentions of Brazilian authorities to increase Brazilian production rates through local content policies. The thesis finds that the low-skill equilibrium does not have a strong presence in the Brazilian oil and gas industry, mainly because of the firms incentives to hire skilled workers. The industry s labor market was extremely heated during the oil boom, with a huge gap between the supply and demand for labor. This resulted in high turnover rates among workers. The thesis cannot however give firm conclusions regarding the role of local content policies in this transition.