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Political-Economic Regime and the Wage Curve: Evidence from Chile, 1957-96

This paper tests whether a wage curve—a negative relationship between unemployment and pay—existed in Santiago, Chile during 1957-1996. The analysis is divided into two periods corresponding to the distinct economic models in place in the country. For 1957-1973, during the period of inward-led development, we reject the existence of a wage curve. The second period, 1974-1996, corresponds to an external opening of the economy and the deregulation of publicly controlled industries and labor relations. For this period, we find a wage curve of –0.08, which is similar to the United States and other western, capitalist economies. Disaggregating the analysis for different groups of workers, we find that since the economic reforms, women’s pay falls three times more than men’s when unemployment doubles. Also, non-university educated and public sector workers have suffered greater pay decreases from unemployment. Workers in the informal sector do not experience a drop in pay, contradicting the notion that the informal sector acts as a buffer for unemployed formal-sector workers.

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Paper provided by Schwartz Center for Economic Policy Analysis (SCEPA), The New School in its series SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. with number 2002-10.

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Length: 33 pages
Date of creation: Aug 2002
Date of revision:
Handle: RePEc:epa:cepawp:2002-10
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  1. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  2. Edwards, Sebastian & Edwards, Alejandra Cox, 1991. "Monetarism and Liberalization," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226184890.
  3. Baltagi, Badi H. & Blien, Uwe, 1998. "The German wage curve: evidence from the IAB employment sample," Economics Letters, Elsevier, vol. 61(2), pages 135-142, November.
  4. David G. Blanchflower & Andrew J. Oswald, 1995. "An Introduction to the Wage Curve," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 153-167, Summer.
  5. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, June.
  6. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
  7. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  8. Kennedy, S. & Borland, J., 1997. "A wage Curve for Australia?," CEPR Discussion Papers 372, Centre for Economic Policy Research, Research School of Economics, Australian National University.
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