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Evolving wage cyclicality in Latin America

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  • Messina, Julian
  • Gambetti, Luca

Abstract

A vector autoregression model with time-varying coefficients is used to examine the evolution of wage cyclicality in four Latin American economies: Brazil, Chile, Colombia and Mexico, during the period 1980-2010. Wages are highly pro-cyclical in all countries up to the mid-1990s except in Chile. Wage cyclicality declines thereafter, especially in Brazil and Colombia. This decline in wage cyclicality is in accordance with declining real-wage flexibility in a low-inflation environment. Controlling for compositional effects caused by changes in labor force participation along the business cycle does not alter these results.

Suggested Citation

  • Messina, Julian & Gambetti, Luca, 2014. "Evolving wage cyclicality in Latin America," Policy Research Working Paper Series 6978, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6978
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    Keywords

    Labor Policies; Environmental Economics&Policies; Labor Markets; Youth and Governance; Economic Theory&Research;
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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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