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Labor Market Adjustment in Chile

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Author Info

  • Kevin Cowan

    ()

  • Alejandro Micco

    ()

  • Carmen Pagés

    ()

Abstract

This paper examines the reasons behind the sudden increase and the slow recovery of unemployment in Chile after the economic slowdown that took place in 1998 as a result of the Asian Crisis. To do so, we analyze the response of employment and wages to this economic shock and show that Chile exhibits substantial wage rigidity. We argue that a large increase in minimum wages, pre-determined before the slowdown, and a widespread practice of negotiating inflation-indexed long-term wage contracts prevented wages from adjusting to the changing economic conditions and slowed down employment growth.

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File URL: http://www.brookings.edu/press/Journals/2005/economiafall2004.aspx
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Bibliographic Info

Article provided by LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION in its journal JOURNAL OF LACEA ECONOMIA.

Volume (Year): (2004)
Issue (Month): ()
Pages:

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Handle: RePEc:col:000425:008667

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Related research

Keywords: Response to Asian crisis; wage rigidity; employment; Chile;

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Cited by:
  1. Andalón, Mabel & Pagés, Carmen, 2008. "Minimum Wages in Kenya," IZA Discussion Papers 3390, Institute for the Study of Labor (IZA).
  2. World Bank, 2007. "Chile : Investment Climate Assessment, Volume 2. Background Chapters," World Bank Other Operational Studies 7716, The World Bank.
  3. Jaime Gatica & Pilar Romaguera, 2005. "El Mercado Laboral en Chile Nuevos Temas y Desaf�os," Documentos de Trabajo 210, Centro de Economía Aplicada, Universidad de Chile.
  4. World Bank, 2007. "Chile : Investment Climate Assessment, Volume 1. Executive Summary and Policy Recommendations," World Bank Other Operational Studies 7695, The World Bank.

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