Evolving Wage Cyclicality in Latin America
35 Pages Posted: 10 Apr 2017
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
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