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Labor Market Regimes and Mobility through a Markov Chain in Chile


  • Ricardo Paredes
  • Victor Lima


In this paper we analyze the dynamics of labor markets in Chile. Our goal is to understand how flexibility in the labor market has changed over time, and in particular, to relate this change with the legislation framework. We analyze mobility in four different periods, each of them associated with different labor regimes. Based on flows, we estimate transition probabilities across three relevant possible states: unemployment, employment, and out of the labor force. Our finding shows that since 1974 employment became less secure. The probability for an employed person of becoming unemployed almost doubled since 1974 and remained thereafter. Also, the probability of remaining unemployed increased from 26,1% in the period 1962-73, to over 40% in the periods 1974-79 and 1980-89, but felt to 25,6% after 1990. This in spite the average unemployment rate doubled between these two periods. The probabilities related with discourage and added worker effects were stable in the different periods considered, except since 1990, where the hypothesis of discouraged workers is challenged. Finally, whilst the natural rate of unemployment doubled after the reforms in 1974, it remained high until the last period, starting in 1990. Changes in participation compensated such changes, and hence, the expected length of unemployment did not increase dramatically in the period, remaining stable around two quarters

Suggested Citation

  • Ricardo Paredes & Victor Lima, 2004. "Labor Market Regimes and Mobility through a Markov Chain in Chile," Econometric Society 2004 Latin American Meetings 317, Econometric Society.
  • Handle: RePEc:ecm:latm04:317

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    References listed on IDEAS

    1. Alexis Camhi & Eduardo Engel & Alejandro Micco, 1997. "Dinámica de empleo y productividad en manufactura: Evidencia micro y consecuencias macro," Documentos de Trabajo 19, Centro de Economía Aplicada, Universidad de Chile.
    2. Claudio Sapelli, 1996. "Modelos para Pensar el Mercado de Trabajo: Una Revisión de la Literatura Chilena," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 33(99), pages 251-276.
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    Cited by:

    1. Claudio Sapelli, 2011. "A cohort analysis of the income distribution in Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 38(1 Year 20), pages 223-242, June.
    2. Claudio Sapelli, 2005. "Returns to Schooling and Income Distribution by Cohort in Chile: An Analysis Based on Synthetic Panel Data," Documentos de Trabajo 290, Instituto de Economia. Pontificia Universidad Católica de Chile..

    More about this item


    labor markets; transition probabilities; unemployment.;

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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