Labor Market Adjustment in Chile

Kevin Cowan (), Alejandro Micco () and Carmen Pages

Economía Journal, 2004, vol. Volume 5 Number 1, issue Fall 2004, 183-218

Abstract: 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.

Keywords: Response to Asian crisis; wage rigidity; employment; Chile (search for similar items in EconPapers)
JEL-codes: J21 J31 J64 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:col:000425:008667

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