Determinants of Labor Demand in Colombia: 1976-1996
AbstractColombia's unemployment rate rose to 20% during the late 1990s from less than 8% in 1994. This paper argues that this has been the result of high non-wage labor costs embodied in the legislation. The estimated own-wage labor demand elasticity is around 0.5, which implies that a reduction in those costs, while politically costly, can have a significant payoff in terms of equity and efficiency. We also find that adjustment costs of changing employment as well as wage elasticities were not affected by changes in the regulations regarding severance payments and dismissal costs. In this sense, structural reforms did have an impact on labor demand through its effect on relative prices alone. Finally, we conclude that the wage elasticity of labor demand increases (in absolute terms) during contractions. Hence, the increase in prices and the beginning of a recession had a significant effect on employment.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10077.
Date of creation: Nov 2003
Date of revision:
Publication status: published as Heckman, James J. and Carmen Pages (eds.) Law and employment: Lessons from Latin America and the Caribbean, NBER Conference Report series. Chicago and London: University of Chicago Press, 2004.
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Other versions of this item:
- Mauricio Cardenas & Raquel Bernal, 2004. "Determinants of Labor Demand in Colombia. 1976–1996," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 229-272 National Bureau of Economic Research, Inc.
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
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