Two Stories of Wage Dynamics in Latin America: Different Policies, Different Outcomes

38 Pages Posted: 2 Jul 2018

See all articles by Gustavo J. Canavire-Bacarreza

Gustavo J. Canavire-Bacarreza

Inter-American Development Bank (IDB); IZA Institute of Labor Economics

Luis Carvajal-Osorio

Universidad EAFIT

Abstract

This article explores the variation in the wage distributions of two Latin American countries, Bolivia and Colombia, which have had different political and economic strategies in recent years. Using data from household surveys, a decomposition of the wage distribution in each country using functional principal component analysis is conducted. The results suggest that Bolivia, which has implemented left-wing economic policies, has experienced a general increase in wages, especially benefiting the least skilled workers and the informal sector. On the other hand, the wage distribution in Colombia, whose economic policy has focused on free-market principles, has become more concentrated around the median wage, mainly due to changes in formal sector wages.

Keywords: wage dynamics, functional principal component analysis, wage distributions, Latin America, Bolivia, Colombia

JEL Classification: J31, J38, C14

Suggested Citation

Canavire Bacarreza, Gustavo Javier and Carvajal-Osorio, Luis, Two Stories of Wage Dynamics in Latin America: Different Policies, Different Outcomes. IZA Discussion Paper No. 11584. Available at SSRN: https://ssrn.com/abstract=3205851

Gustavo Javier Canavire Bacarreza (Contact Author)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Luis Carvajal-Osorio

Universidad EAFIT

Carrera 49 N° 7 sur – 50
Bogotá, 00000
Colombia

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