Evolving Wage Cyclicality in Latin America

35 Pages Posted: 10 Apr 2017

See all articles by Luca Gambetti

Luca Gambetti

Universitat Autonoma de Barcelona

Julian Messina

Inter-American Development Bank (IDB) - Research Department

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Abstract

Examines the evolution of the cyclicality of real wages and employment in four Latin American economies: Brazil, Chile, Colombia and Mexico, during the period 1980-2010. Wages are highly pro-cyclical during the 1980s and early 1990s, a period characterized by high inflation. As inflation declined wages became less pro-cyclical, a feature that is consistent with emerging downward wage rigidities in a low inflation environment. Compositional effects associated with changes in labor participation along the business cycle appear to matter less for estimates of wage cyclicality than in developed economies.

Keywords: downward wage rigidity, indexation, real wage cyclicality, vector autoregression, time varying coefficients, Bayesian estimation

JEL Classification: E24

Suggested Citation

Gambetti, Luca and Messina, Julian, Evolving Wage Cyclicality in Latin America. IZA Discussion Paper No. 10657, Available at SSRN: https://ssrn.com/abstract=2949073

Luca Gambetti (Contact Author)

Universitat Autonoma de Barcelona ( email )

Plaça Cívica
Cerdañola del Valles
Barcelona, Barcelona 08193
Spain

Julian Messina

Inter-American Development Bank (IDB) - Research Department ( email )

1300 New York Ave., NW
Washington, DC 20577
United States

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