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The wage elasticity of labour demand in the Uruguayan manufacturing sector after re-unionisation: new results

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  • Adriana Cassoni

    (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Abstract

This paper provides new evidence on the magnitude of the elasticity of substitution between labour and capital for the Uruguayan manufacturing sector. Labour demand is derived using a right-to-manage model estimated for the period 1985-1997 using data for six industries. The evidence found suggests that the elasticity is generally less than 1. Differences by industry and in time are also found. The latter result may be linked both to the integration process underwent by Uruguay in the nineties and to the changes in the bargaining framework that took place in that same period. As a nested CES production function is used to derive the labour demand, the partial elasticity of substitution between production and non-production workers is also calculated, being its magnitude quite low. Finally, the model was estimated using data from industrial surveys (gathered from firms) and from household surveys. The comparison of results shows that when using industrial surveys data the estimated elasticities are higher than when using household surveys data. The result is probably related to the different coverage of both sources, as well as to the different accuracy reached in measuring wages.

Suggested Citation

  • Adriana Cassoni, 1999. "The wage elasticity of labour demand in the Uruguayan manufacturing sector after re-unionisation: new results," Documentos de Trabajo (working papers) 1499, Department of Economics - dECON.
    • Handle: RePEc:ude:wpaper:1499
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    File URL: https://hdl.handle.net/20.500.12008/1901
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    References listed on IDEAS

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    1. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    2. Adriana Cassoni, 1999. "Labour demand in Uruguay before and after re-unionisation," Documentos de Trabajo (working papers) 0199, Department of Economics - dECON.
    3. Adriana Cassoni & Steven G. Allen & Gaston J. Labadie, 2004. "Unions and Employment in Uruguay," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 435-496, National Bureau of Economic Research, Inc.
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    8. Rama, Martin, 1994. "Bargaining structure and economic performance in the open economy," European Economic Review, Elsevier, vol. 38(2), pages 403-415, February.
    9. Steven G Allen & Adriana Cassoni & Gastón J Labadie, 1996. "Wages and Employment After Reunionization in Uruguay," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 33(99), pages 277-294.
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    Cited by:

    1. Konstantinos Drakos & Christos Kallandranis, 2006. "Modelling Labour Demand Dynamics beyond the Frictionless Environment," LABOUR, CEIS, vol. 20(4), pages 699-720, December.
    2. Carlos Casacuberta & Marcel Vaillant, 2002. "Trade and wages in Uruguay in the 1990’s," Documentos de Trabajo (working papers) 0902, Department of Economics - dECON.
    3. Adriana Cassoni, 2001. "Unemployment and precariousness of employment in Uruguay: who are the losers?," Documentos de Trabajo (working papers) 1601, Department of Economics - dECON.
    4. World Bank, 2001. "Uruguay : Maintaining Social Equity in a Changing Economy," World Bank Publications - Reports 15486, The World Bank Group.

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