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Economics Reform and Wage Differentials in Latin America

48 Pages Posted: 21 Apr 2011  

Miguel Székely

Center for Education and Social Studies

Nancy Birdsall

Center for Global Development

Jere Behrman

University of Pennsylvania - Department of Economics

Date Written: October 2000

Abstract

This paper develops and applies a new approach to the estimation of the impact of economy-wide reforms on wage differentials, using a new high-quality data set on wage differentials by schooling level for 18 Latin American countries for the period 1980-1998. The results indicate that reform overall has had a short-run disequalizing effect of expanding wage differentials, although this effect tends to fade over time. This disequalizing effect is due to the strong impact of domestic financial market reform, capital account liberalization and tax reform. On the other hand, privatization contributed to narrowing wage differentials, and trade openness had no effect on wage differentials. Technological progress, rather than trade flows, appears to be a channel through which reforms are affecting inequality. The paper also explores the effects of reforms on wage levels; tentative results suggest that reforms have had a positive effect on real average wages, but a negative effect on the wages of less-schooled workers. Keywords: reform, inequality, wages, trade, distribution

Suggested Citation

Székely, Miguel and Birdsall, Nancy and Behrman, Jere, Economics Reform and Wage Differentials in Latin America (October 2000). IDB Working Paper No. 365. Available at SSRN: https://ssrn.com/abstract=1817234 or http://dx.doi.org/10.2139/ssrn.1817234

Miguel Székely (Contact Author)

Center for Education and Social Studies ( email )

Mexico City
Mexico

Nancy Birdsall

Center for Global Development ( email )

2055 L St. NW
5th floor
Washington, DC 20036
United States
202-416-0700 (Phone)

Jere R. Behrman

University of Pennsylvania - Department of Economics ( email )

160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
United States
215-898-7704 (Phone)
215-573-2057 (Fax)

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