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Unemployment in Latin America and the Caribbean

Author

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  • Laurence Ball

    ()

  • Nicolás Roux

    ()

  • Marc Hofstetter

    ()

Abstract

This study constructs a new data set on unemployment rates in Latin America and the Caribbean and then explores the determinants of unemployment. We compare different countries, finding that unemployment is influenced by the size of the rural population and that the effects of government regulations are generally weak. We also examine large, persistent increases in unemployment over time, finding that they are caused by contractions in aggregate demand. These demand contractions result from either disinflationary monetary policy or the defense of an exchange-rate peg in the face of capital flight. Our evidence supports hysteresis theories in which short-run changes in unemployment influence the natural rate. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Laurence Ball & Nicolás Roux & Marc Hofstetter, 2013. "Unemployment in Latin America and the Caribbean," Open Economies Review, Springer, vol. 24(3), pages 397-424, July.
    • Handle: RePEc:kap:openec:v:24:y:2013:i:3:p:397-424
    DOI: 10.1007/s11079-012-9248-2
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    References listed on IDEAS

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    1. Laurence Ball & Nicolás Roux & Marc Hofstetter, 2013. "Unemployment in Latin America and the Caribbean," Open Economies Review, Springer, vol. 24(3), pages 397-424, July.
    2. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    3. Laurence Ball & N. Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 115-136, Fall.
    4. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    5. Simeon Djankov & Tim Ganser & Caralee McLiesh & Rita Ramalho & Andrei Shleifer, 2010. "The Effect of Corporate Taxes on Investment and Entrepreneurship," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 31-64, July.
    6. Laurence Ball, 1999. "Aggregate demand and Long-Run Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(2), pages 189-252.
    7. Douglas Staiger & James H. Stock & Mark W. Watson, 1997. "The NAIRU, Unemployment and Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 33-49, Winter.
    8. Ball, Laurence, 2010. "The Performance of Alternative Monetary Regimes," Handbook of Monetary Economics,in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 23, pages 1303-1343 Elsevier.
    9. Bernal Raquel, 2009. "The Informal Labor Market in Colombia: identification and characterization," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, September.
    10. Siebert, Horst, 1997. "Labor market rigidities and unemployment in Europe," Kiel Working Papers 787, Kiel Institute for the World Economy (IfW).
    11. Jeff Fuhrer & Jane Sneddon Little & Yolanda K. Kodrzycki & Giovanni P. Olivei (ed.), 2009. "Understanding Inflation and the Implications for Monetary Policy: A Phillips Curve Retrospective," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262013630, March.
    12. Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer.
    13. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
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    Cited by:

    1. Jorge Andrés Tamayo & Jairo Núñez & Carlos Medina, 2013. "The Unemployment Subsidy Program in Colombia: An Assessment," IDB Publications (Working Papers) 4622, Inter-American Development Bank.
    2. Nicolás De Roux & Marc Hofstetter, 2014. "Sacrifice Ratios and Inflation Targeting: The Role of Credibility," International Finance, Wiley Blackwell, vol. 17(3), pages 381-401, December.
    3. Laurence Ball & Nicolás Roux & Marc Hofstetter, 2013. "Unemployment in Latin America and the Caribbean," Open Economies Review, Springer, vol. 24(3), pages 397-424, July.
    4. Andrés Fernández Martín & Juan David Herreño, 2013. "Equilibrium Unemployment During Financial Crises," IDB Publications (Working Papers) 4238, Inter-American Development Bank.
    5. Kaldewei, Cornelia & Weller, Jürgen, 2013. "Empleo, crecimiento sostenible e igualdad," Macroeconomía del Desarrollo 145, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    6. -, 2014. "Inestabilidad y desigualdad: La vulnerabilidad del crecimiento en América Latina y el Caribe," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 128 edited by Cepal.
    7. Andrés Álvarez & Marc Hofstetter, 2014. "Job vacancies in Colombia: 1976–2012," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-11, December.
    8. Marcela Eslava & Arturo Galindo & Marc Hofstetter & Alejandro Izquierdo, 2010. "Scarring Recessions and Credit Constraints: Evidence from Colombian Plant Dynamics," DOCUMENTOS CEDE 007711, UNIVERSIDAD DE LOS ANDES-CEDE.
    9. Andrea Vaona, 2015. "Anomalous empirical evidence on money long-run super-neutrality and the vertical long-run Phillips curve," Working Papers 17/2015, University of Verona, Department of Economics.
    10. De Roux, Nicolás & Hofstetter, Marc, 2014. "Do preferences shape institutions? The case of inflation aversion and inflation targeting," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 51(C), pages 68-78.
    11. Luis Eduardo Arango Thomas, 2011. "Mercado de trabajo de Colombia: suma de partes heterogéneas," Borradores de Economia 671, Banco de la Republica de Colombia.
    12. Craigwell, Roland & Mathouraparsad, Sebastien & Maurin, Alain, 2011. "Unemployment hysteresis in the English-speaking Caribbean: evidence from non-linear models," MPRA Paper 33440, University Library of Munich, Germany.
    13. -, 2014. "Economic Survey of Latin America and the Caribbean 2014: Challenges to sustainable growth in a new external context," Estudio Económico de América Latina y el Caribe, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37033 edited by Eclac, August.
    14. Chul-In Lee, 2015. "Agglomeration, search frictions and growth of cities in developing economies," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(2), pages 421-451, December.
    15. Christoph S. Weber, 2017. "The Unemployment Effect of Central Bank Transparency," Working Papers 172, Bavarian Graduate Program in Economics (BGPE).
    16. Seguino, Stephanie & Braunstein, Elissa, 2012. "The impact of economic policy and structural change on gender employment inequality in Latin America, 1990-2010," MPRA Paper 43261, University Library of Munich, Germany.
    17. Enrique López-Bazo & Juan C. Duque & Gustavo A. García & Paula Herrera-Idágarra, 2015. "Heterogeneidad regional en las diferencias por género en las tasas de desempleo en Colombia," IDB Publications (Working Papers) 89037, Inter-American Development Bank.
    18. Nicolás de Roux & Marc Hofstetter, 2011. "On the Endogeneity of Inflation Targeting: Preferences Over Inflation," DOCUMENTOS CEDE 008731, UNIVERSIDAD DE LOS ANDES-CEDE.
    19. Andrés Álvarez, 2016. "La Curva de Beveridge en Colombia (1976-2014): Cambios cíclicos y estructurales," Borradores de Economia 962, Banco de la Republica de Colombia.
    20. -, 2014. "Estudio Económico de América Latina y el Caribe 2014: desafíos para la sostenibilidad del crecimiento en un nuevo contexto externo," Estudio Económico de América Latina y el Caribe, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 36970 edited by Cepal, August.
    21. César Augusto MERCHÁN HERNÁNDEZ, 2014. "Desempleo y ocupación en las ciudades colombianas. Un ejercicio con datos panel," ARCHIVOS DE ECONOMÍA 011212, DEPARTAMENTO NACIONAL DE PLANEACIÓN.
    22. Luis E. Arango & Luz A. Flórez, 2016. "Determinants of structural unemployment in Colombia. A search approach," Borradores de Economia 969, Banco de la Republica de Colombia.
    23. Luis E. Arango & Luz A. Flórez, 2017. "Informalidad laboral y elementos para un salario mínimo diferencial por regiones en Colombia," Borradores de Economia 1023, Banco de la Republica de Colombia.

    More about this item

    Keywords

    Unemployment; Latin America; Hysteresis; Monetary policy; Disinflation; E24; E52; F41; J60;

    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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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