Evolving Wage Cyclicality in Latin America

30 Pages Posted: 20 Apr 2016

Date Written: July 1, 2014

Abstract

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.

Keywords: Rural Labor Markets, Labor Markets, Macroeconomic Management

Suggested Citation

Messina, Julián, Evolving Wage Cyclicality in Latin America (July 1, 2014). World Bank Policy Research Working Paper No. 6978, Available at SSRN: https://ssrn.com/abstract=2470771

Julián Messina (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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