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Economic Growth and Wage Stagnation in Perú: 1998-2012

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  • Peter Paz

    (Centro de Investigación Económica, ITAM.)

  • Carlos Urrutia

    (Centro de Investigación Económica, ITAM.)

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    Abstract

    In the last two decades, the Peruvian economy exhibited rapid growth. Moreover, the composition of the labor force improved in terms of education and experience, two variables which are typically associated to higher human capital. The average worker in 2012 had a higher level of education and was one and a half years older than in 1998, reflecting the impact of the demographic transition. However, the average real wage was roughly constant. We show that a decline in the wage premium for education, and to a minor extent for experience, is responsible for the lack of growth in the average real wage. Had these two premia remained constant throughout the period of analysis, average labor earnings would have increased by about 2.6 percent per year, of which 0.7 percentage points are accounted for the changes in the composition of the labor force in terms of age and education. We explore the role of the relative supply of workers with different levels of human capital as an explanation for the decline in the wage premium for education. Finally, we analyze the implications of these findings for some macroeconomic variables, as earnings and wage inequality, the labor share and total factor productivity. JEL Classification-JEL: I24, J21, J24, J31, O47

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    Bibliographic Info

    Paper provided by Departamento de Economía - Pontificia Universidad Católica del Perú in its series Documentos de Trabajo with number 2014-372.

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    Length: 16 pages
    Date of creation: 2014
    Date of revision:
    Publication status: published
    Handle: RePEc:pcp:pucwps:wp00372

    Contact details of provider:
    Postal: Av. Universitaria 1801, San Miguel, Lima, Perú
    Phone: (511) 626-2000 ext. 4950, 4951
    Fax: (511) 626-2874
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    Web page: http://www.pucp.edu.pe/departamento/economia/
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    Related research

    Keywords: education; economic growth; human capital; labor productivity; wages;

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    References

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    1. Juan Castro & Gustavo Yamada, 2012. "“Convexification” and “Deconvexification” of the Peruavian Wage Profile: A Tale of Declining Education Quality," Working Papers 12-02, Departamento de Economía, Universidad del Pacífico, revised Apr 2012.
    2. Lustig, Nora & Lopez-Calva, Luis F. & Ortiz-Juarez, Eduardo, 2013. "Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico," World Development, Elsevier, vol. 44(C), pages 129-141.
    3. Benjamin F. Jones, 2011. "The Human Capital Stock: A Generalized Approach," NBER Working Papers 17487, National Bureau of Economic Research, Inc.
    4. Cristian Aedo & Ian Walker, 2012. "Skills for the 21st Century in Latin America and the Caribbean," World Bank Publications, The World Bank, number 2236, October.
    5. Norman V. Loayza, 2008. "El crecimiento económico en el perú," Revista Economía, Departamento de Economía - Pontificia Universidad Católica del Perú, issue 61, pages 9-25.
    6. Ledesma, Alan, 2010. "Crecimiento Potencial y Productividad de Factores," Revista Moneda, Banco Central de Reserva del Perú, issue 145, pages 4-8.
    7. Loukas Karabarbounis & Brent Neiman, 2013. "The Global Decline of the Labor Share," NBER Working Papers 19136, National Bureau of Economic Research, Inc.
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