IDEAS home Printed from https://ideas.repec.org/p/ioe/doctra/396.html

Labor Market Regulations and Productivity: Evidence from Chilean Manufacturing Plants

Author

Listed:
  • Rodrigo Álvarez
  • Rodrigo Fuentes

Abstract

This paper analyzes the effect of minimum wage and labor market regulations on productivity. The main hypothesis to be tested is that an increase in the relative minimum wage could have a negative effect on total factor productivity (TFP) if there are important costs of adjustment like firing costs. Using data for the Chilean manufacturing industry for the period 1992 2005, we find that the effect of relative minimum wage is negative and significant. The quantitative effect on cumulative TFP for an industry in the 25th percentile of relative minimum wage increase was a decline of 5.3% for the period 1998-2005, but for an industry in the 75th percentile of relative minimum wage increase, the cumulative reduction in TFP was 10.2%, over the same period. We also find that the continuous reduction in unilateral trade restrictions and through free trade agreements has been productivity enhancing. This is especially true for those sectors with larger exposure to international trade.

Suggested Citation

  • Rodrigo Álvarez & Rodrigo Fuentes, 2011. "Labor Market Regulations and Productivity: Evidence from Chilean Manufacturing Plants," Documentos de Trabajo 396, Instituto de Economia. Pontificia Universidad Católica de Chile..
    • Handle: RePEc:ioe:doctra:396
    as

    Download full text from publisher

    File URL: https://www.economia.uc.cl/docs/doctra/dt-396.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Sanchez-Paramo, Carolina & Schady, Norbert, 2003. "Off and running? Technology, trade and the rising demand for skilled workers in Latin America," Policy Research Working Paper Series 3015, The World Bank.
    2. Peter K. Schott, 2004. "Across-Product Versus Within-Product Specialization in International Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 647-678.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. World Bank, 2013. "Minimum Wage Policy : Lessons with a Focus on the ASEAN Region," World Bank Publications - Reports 16687, The World Bank Group.
    2. Laura Pabon & Ximena Del Carpio, 2014. "Minimum Wage Policy : Lessons with a Focus on the ASEAN Region," World Bank Publications - Reports 19027, The World Bank Group.
    3. -, 2018. "Economic Survey of Latin America and the Caribbean 2018. Evolution of investment in Latin America and the Caribbean: stylized facts, determinants and policy challenges," Estudio Económico de América Latina y el Caribe, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 43965 edited by Eclac, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pinelopi K. Goldberg & Nina Pavcnik, 2004. "Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries," NBER Working Papers 10593, National Bureau of Economic Research, Inc.
    2. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    3. Gallego, Francisco A., 2012. "Skill Premium in Chile: Studying Skill Upgrading in the South," World Development, Elsevier, vol. 40(3), pages 594-609.
    4. ZHANG,Hongyong & CHENG,Wenyin & LIANG,David Tao & Meng,Bo, 2024. "Industrial Subsidies along Domestic Value Chains and their Impacts on China’s Exports," IDE Discussion Papers 937, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    5. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2005. "Short‐term Consequences of Trade Reform for Industry Employment and Wages: Survey of Evidence from Colombia," The World Economy, Wiley Blackwell, vol. 28(7), pages 923-939, July.
    6. Roberto Álvarez & Rodrigo Fuentes, 2004. "Patterns of Specialization and Economic Growth in Chile by Sector," Working Papers Central Bank of Chile 288, Central Bank of Chile.
    7. Chen, Natalie & Juvenal, Luciana, 2022. "Markups, quality, and trade costs," Journal of International Economics, Elsevier, vol. 137(C).
    8. Zhi Wang & Shang-Jin Wei, "undated". "The Chinese Export Bundles: Patterns, Puzzles and Possible Explanations," Indian Council for Research on International Economic Relations, New Delhi Working Papers 226, Indian Council for Research on International Economic Relations, New Delhi, India.
    9. Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2012. "North–South technology transfer in unionised multinationals," Journal of Development Economics, Elsevier, vol. 99(2), pages 385-395.
    10. Stephen J. Redding & David E. Weinstein, 2017. "Aggregating from Micro to Macro Patterns of Trade," NBER Working Papers 24051, National Bureau of Economic Research, Inc.
    11. Antoine Gervais, 2015. "Product quality, firm heterogeneity and trade liberalization," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 24(4), pages 523-541, June.
    12. Cristiana & Teodora Borota, 2011. "World Trade Patterns and Prices: The Role of Productivity and Quality Heterogeneity," Working papers 19, National Bank of Serbia.
    13. Robert Z. Lawrence & Lawrence Edward, 2010. "Do Developed and Developing Countries Compete Head to Head in High Tech?," Working Paper Series WP10-8, Peterson Institute for International Economics.
    14. repec:ptu:bdpart:e201711 is not listed on IDEAS
    15. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(2), pages 489-530.
    16. Carlos Medina & Christian Posso, 2010. "Technical Change and Polarization of the Labor Market: Evidence for Brazil, Colombia and Mexico," Borradores de Economia 614, Banco de la Republica de Colombia.
    17. Angela Cheptea & Lionel Fontagné & Soledad Zignago, 2014. "European export performance," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(1), pages 25-58, February.
    18. Christopher Hansman & Jonas Hjort & Gianmarco León-Ciliotta & Matthieu Teachout, 2020. "Vertical Integration, Supplier Behavior, and Quality Upgrading among Exporters," Journal of Political Economy, University of Chicago Press, vol. 128(9), pages 3570-3625.
    19. Duvaleix, Sabine & Emlinger, Charlotte & Gaigné, Carl & Latouche, Karine, 2021. "Geographical indications and trade: Firm-level evidence from the French cheese industry," Food Policy, Elsevier, vol. 102(C).
    20. Masashige Hamano, 2013. "On business cycles of variety and quality," DEM Discussion Paper Series 13-21, Department of Economics at the University of Luxembourg.
    21. Richard Baldwin & James Harrigan, 2011. "Zeros, Quality, and Space: Trade Theory and Trade Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 60-88, May.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ioe:doctra:396. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jaime Casassus (email available below). General contact details of provider: https://edirc.repec.org/data/iepuccl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.