Labor Market Adjustment in Chile

Economia, Forthcoming

32 Pages Posted: 28 Feb 2005

See all articles by Carmen Pages

Carmen Pages

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

Alejandro Micco

University of Chile

Kevin Cowan

Adolfo Ibanez University


This paper examines the reasons behind the sudden increase and the slow recovery of unemployment in Chile after the economic slowdown that took place in 1998 as a result of the Asian Crisis. To do so, we analyze the response of employment and wages to this economic shock and show that Chile exhibits substantial wage rigidity. We argue that a large increase in minimum wages, pre-determined before the slowdown, and a widespread practice of negotiating inflation-indexed long-term wage contracts prevented wages from adjusting to the changing economic conditions and slowed down employment growth.

Suggested Citation

Pages-Serra, Carmen and Micco, Alejandro and Cowan, Kevin, Labor Market Adjustment in Chile. Economia, Forthcoming, Available at SSRN:

Carmen Pages-Serra (Contact Author)

Inter-American Development Bank (IADB) ( email )

1300 New York Avenue, NW
Research Department
Washington, DC 20577
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202-623 3110 (Phone)
202-623-2481 (Fax)

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072

Alejandro Micco

University of Chile ( email )

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421

Kevin Cowan

Adolfo Ibanez University ( email )


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