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Economic Policy and Wage Differentials in Latin America

Author

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  • Jere R. Behrman

    ()

  • Nancy Birdsall
  • Miguel Székely

Abstract

This paper applies a new approach to the estimation of the impact of policy, both the levels and the changes, on wage differentials using a new high-quality data set on wage differentials by schooling level for 18 Latin American countries for the period 1977-1998. The results indicate that liberalizing policy changes overall have had a short-run disequalizing effect of expanding wage differentials, although this effect tends to fade away over time. This disequalizing effect is due to the strong impact of domestic financial market reform, capital account liberalization and tax reform. On the other hand, privatization contributed to narrowing wage differentials and trade openness had no significant effect on wage differentials. Technological progress, rather than trade flows, appears to be a channel through which policy changes are affecting inequality.

Suggested Citation

  • Jere R. Behrman & Nancy Birdsall & Miguel Székely, 2003. "Economic Policy and Wage Differentials in Latin America," Working Papers 29, Center for Global Development.
  • Handle: RePEc:cgd:wpaper:29
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    File URL: http://www.cgdev.org/content/publications/detail/2761
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    Keywords

    Latin America; wages; market reform; tax reform; technological change;

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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