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Political-Economic Regime and the Wage Curve: Evidence from Chile, 1957-96

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Abstract

This paper tests whether a wage curve—a negative relationship between unemployment and pay—existed in Santiago, Chile during 1957-1996. The analysis is divided into two periods corresponding to the distinct economic models in place in the country. For 1957-1973, during the period of inward-led development, we reject the existence of a wage curve. The second period, 1974-1996, corresponds to an external opening of the economy and the deregulation of publicly controlled industries and labor relations. For this period, we find a wage curve of –0.08, which is similar to the United States and other western, capitalist economies. Disaggregating the analysis for different groups of workers, we find that since the economic reforms, women's pay falls three times more than men's when unemployment doubles. Also, non-university educated and public sector workers have suffered greater pay decreases from unemployment. Workers in the informal sector do not experience a drop in pay, contradicting the notion that the informal sector acts as a buffer for unemployed formal-sector workers.

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  • Janine Berg & Dante Contreras, 2002. "Political-Economic Regime and the Wage Curve: Evidence from Chile, 1957-96," SCEPA working paper series. 2002-10, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    • Handle: RePEc:epa:cepawp:2002-10
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    1. Pierre, Gaelle & Scarpetta, Stefano, 2007. "How labor market policies can combine workers'protection with job creation : a partial review of some key issues and policy options," Social Protection Discussion Papers and Notes 41439, The World Bank.
    2. Pierre, Gaelle & Scarpetta, Stefano, 2004. "Employment regulations through the eyes of employers - do they matter and how do firms respond to them?," Policy Research Working Paper Series 3463, The World Bank.
    3. Freeman, Richard B., 2010. "Labor Regulations, Unions, and Social Protection in Developing Countries," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4657-4702, Elsevier.
    4. Badi H. Baltagi & Yusuf Soner Baskaya & Timur Hulagu, 2013. "How different are the wage curves for formal and informal workers? Evidence from Turkey," Papers in Regional Science, Wiley Blackwell, vol. 92(2), pages 271-283, June.
    5. Badi H. Baltagi & Bartlomiej Rokicki & Kênia Barreiro Souza, 2017. "The Brazilian wage curve: new evidence from the National Household Survey," Empirical Economics, Springer, vol. 53(1), pages 267-286, August.
    6. Kazuyuki Inagaki, 2015. "Wage curve in dual labor markets: cross-sectional evidence from Japan," Economics and Business Letters, Oviedo University Press, vol. 4(2), pages 51-56.
    7. Hector Elias Gutierrez Rufrancos, 2012. "The Mexican Wage Curve 2000-2003: A Quantile Analysis," Working Paper Series 3412, Department of Economics, University of Sussex Business School.
    8. Richard B. Freeman, 2009. "Labor Regulations, Unions, and Social Protection in Developing Countries: Market distortions or Efficient Institutions?," NBER Working Papers 14789, National Bureau of Economic Research, Inc.
    9. Esteban Sanroma & Raul Ramos, 2005. "Further Evidence on Disaggregated Wage Curves: The Case of Spain," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 8(3), pages 227-243, September.
    10. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
    11. Mr. Christopher S Adam & Mr. Edward F Buffie, 2020. "The Minimum Wage Puzzle in Less Developed Countries: Reconciling Theory and Evidence," IMF Working Papers 2020/023, International Monetary Fund.
    12. Ramos, Raul & Duque, Juan C. & Surinach, Jordi, 2010. "Is the wage curve formal or informal? Evidence for Colombia," Economics Letters, Elsevier, vol. 109(2), pages 63-65, November.
    13. Víctor M. Montuenga‐Gómez & José M. Ramos‐Parreño, 2005. "Reconciling the Wage Curve and the Phillips Curve," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 735-765, December.
    14. Marisa Carla Bucheli Anaya & Cecilia González Rodríguez-Villamil, 2012. "An estimation of the wage curve for Uruguay," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, June.
    15. Deller, Steven C., 2009. "Wages, Rent, Unemployment and Amenities," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 39(2), pages 1-14.
    16. Taiwo Aderemi, 2015. "Does the wage curve exist in Nigeria? Evidence from a disaggregated labour market," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 17(2), pages 184-199, October.
    17. David Castro Lugo, 2006. "Curva salarial: una aplicación para el caso de México, 1993-2002," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 21(2), pages 233-273.

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    More about this item

    Keywords

    wage curve; unemployment; inequality; Chile;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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