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Evolving wage cyclicality in Latin America

Listed author(s):
  • Messina, Julian
  • Gambetti, Luca

A vector autoregression model with time-varying coefficients is used to examine the evolution of wage cyclicality in four Latin American economies: Brazil, Chile, Colombia and Mexico, during the period 1980-2010. Wages are highly pro-cyclical in all countries up to the mid-1990s except in Chile. Wage cyclicality declines thereafter, especially in Brazil and Colombia. This decline in wage cyclicality is in accordance with declining real-wage flexibility in a low-inflation environment. Controlling for compositional effects caused by changes in labor force participation along the business cycle does not alter these results.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6978.

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Date of creation: 01 Jul 2014
Handle: RePEc:wbk:wbrwps:6978
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