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Evolving Wage Cyclicality in Latin America

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  • Luca Gambetti
  • Julián Messina

Abstract

This paper examines the evolution of the cyclicality of real wages and employment in four Latin American economies (Brazil, Chile, Colombia and Mexico) during the period 1980-2010. Wages are highly pro-cyclical during the 1980s and early 1990s, a period characterized by high inflation. As inflation declined wages became less pro-cyclical, a feature that is consistent with emerging downward wage rigidities in a low-inflation environment. Compositional effects associated with changes in labor participation along the business cycle appear to matter less for estimates of wage cyclicality than in developed economies.

Suggested Citation

  • Luca Gambetti & Julián Messina, 2016. "Evolving Wage Cyclicality in Latin America," IDB Publications (Working Papers) 7791, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:7791
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    References listed on IDEAS

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    More about this item

    Keywords

    Wage Flexibility; Employment Rate; Wage Rigidity; Labor Force; Wage Adjustment; Labor markets; employment; labor force; wage flexibility; wage cyclicality;

    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

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