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Economic Reforms and Labor Markets: Policy Issues and Lessons from Chile
Sebastian Edwards University of California, Los Angeles - Global Economics and Management (GEM) Area; National Bureau of Economic Research (NBER) Alejandra Cox Edwards California State University, Long Beach - Department of Economics April 1, 2000 NBER Working Paper No. W7646 Abstract: This paper deals with the reform to labor market regulation implemented by Chile during the last twenty years. We concentrate on the reform to job security, on the decentralization of the wage bargaining process, and on the reduction in payroll taxes. Our interest is to understand to what extent these reforms helped reduce Chile's rate of unemployment from "European" to "U.S." levels. We argue that the reduction of payroll taxes (within the context of the social security reform), and the decentralization of bargaining increased labor market flexibility and contributed to the reduction of unemployment. Our analysis suggests that the reform on job security had no significant effect on the aggregate rate of unemployment.
JEL Classifications: J5, J6 Working Paper SeriesDate posted: May 16, 2000 ; Last revised: April 02, 2001Suggested CitationContact Information
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