Economic Reform and Wage Differentials in Latin America

IADB Research Working Paper No. 435

45 Pages Posted: 12 Feb 2001

See all articles by Jere Behrman

Jere Behrman

University of Pennsylvania - Department of Economics

Nancy Birdsall

Center for Global Development

Miguel Szekely

Independent

Date Written: December 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 away 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

JEL Classification: D31, J31

Suggested Citation

Behrman, Jere R. and Birdsall, Nancy and Szekely, Miguel, Economic Reform and Wage Differentials in Latin America (December 2000). IADB Research Working Paper No. 435. Available at SSRN: https://ssrn.com/abstract=258951 or http://dx.doi.org/10.2139/ssrn.258951

Jere R. Behrman

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-7704 (Phone)
215-573-2057 (Fax)

Nancy Birdsall

Center for Global Development ( email )

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

Miguel Szekely (Contact Author)

Independent

No Address Available
United States

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