Labor Market Dyncamics in Chile: the Role of Terms of Trade Shocks
In this paper we explore the channels through which the terms of trade affect labor market variables in an emerging economy such as Chile. In doing so, we analyze the cyclical properties of labor market variables and use a structural vector autoregressive model to analyze the empirical responses of variables such as unemployment rate, job finding rate, sectoral employment and sectoral average labor productivity to terms of trade shocks in the case of Chile, which come from two main sources: the mining and the non-mining sector. We then develop a multi-sector model with search frictions that generates fluctuations in the unemployment rate. Using a calibrated version of this model for Chile, we analyze the ability of the model to replicate the observed responses of labor market variables to terms of trade shocks. We find that the model can predict quantitatively the effects of labor market variables to non-mining terms of trade shocks. Although the model is able to obtain responses to mining price changes qualitatively similar to what is estimated in the data, it falls short to the estimated magnitude of reduction in unemployment that follows a rise in mining prices. The presence of very high wage rigidity can help to generate a sharper fall in unemployment after a mining terms of trade rise. Finally, the model remarks a more intense sectoral labor reallocation in response to terms of trade shocks than the amount estimated in the data.
|Date of creation:||Aug 2011|
|Contact details of provider:|| Postal: Casilla No967, Santiago|
Phone: (562) 670 2000
Fax: (562) 698 4847
Web page: http://www.bcentral.cl/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mendoza, Enrique G, 1995. "The Terms of Trade, the Real Exchange Rate, and Economic Fluctuations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 101-137, February.
- Schmitt-Grohe, Stephanie & Uribe, Martin, 2003.
"Closing small open economy models,"
Journal of International Economics,
Elsevier, vol. 61(1), pages 163-185, October.
- Stephanie Schmitt-Grohe & Martin Uribe, 2001. "Closing Small Open Economy Models," Departmental Working Papers 200115, Rutgers University, Department of Economics.
- Stephanie Schmitt-Grohe & Martin Uribe, 2002. "Closing Small Open Economy Models," NBER Working Papers 9270, National Bureau of Economic Research, Inc.
- Schmitt-Grohé, Stephanie & Uribe, Martín, 2002. "Closing Small Open Economy Models," CEPR Discussion Papers 3096, C.E.P.R. Discussion Papers.
- Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
- Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
- Raphael Bergoeing & Felipe Morandé, 2002. "Crecimiento, Empleo e Impuestos al Trabajo: Chile 1998-2001," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 39(117), pages 157-174.
- Raphael Bergoeing & Felipe Morandé, 2002. "Crecimiento, empleo e impuestos al trabajo: Chile 1998-2001," Documentos de Trabajo 127, Centro de Economía Aplicada, Universidad de Chile.
- Raphael Bergoeing & Felipe Morandé, 2002. "Crecimiento, Empleo e Impuestos al Trabajo: Chile 1998-2001," Working Papers wp193, University of Chile, Department of Economics.
- Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
- Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
- Rudolfs Bems, 2008. "Aggregate Investment Expenditures on Tradable and Nontradable Goods," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 852-883, October.
- Rudolfs Bems, 2008. "Aggregate Investment Expenditures on Tradable and Nontradable Goods," IMF Working Papers 08/45, International Monetary Fund.
- Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
- Ingrid Jones & Alberto Naudon, 2009. "Dinámica Laboral y Evolución del Desempleo en Chile," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 12(3), pages 79-87, December.
- Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March. Full references (including those not matched with items on IDEAS)