Evolving Wage Cyclicality in Latin America. (10th September 2016)

• Record Type: Journal Article
• Authors: Gambetti, Luca; Messina, Julián
• Is Part Of: World Bank economic review. Volume 32:Number 3(2018)
• Page Start: 709
• Page End: 726
• Publication Date: 2016-09-10
• Subjects: Bayesian estimation -- downward wage rigidity -- indexation -- real wage cyclicality -- time varying coefficients -- vector autoregression; Economic development -- Periodicals; Developing countries -- Economic conditions -- Periodicals; Developing countries -- Economic policy -- Periodicals; 330.91724
• DOI: 10.1093/wber/lhw046
• Languages: English
• ISSNs: 0258-6770

Abstract

Abstract: This paper 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 were highly procyclical during the 1980s and early 1990s, a period characterized by high inflation. As inflation declined wages became less procyclical, 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.