Political-Economic Regime and the Wage Curve: Evidence from Chile, 1957-96

Janine Berg and Dante Contreras

International Review of Applied Economics, 2004, vol. 18, issue 2, 151-165

Abstract: This paper tests whether a wage curve—a negative relationship between the level of unemployment and the level of pay—existed in Chile during 1957-96. The analysis is divided into two periods. For 1957-73, during inward-led development, we reject the existence of a wage curve. For 1974-96, when the economy opened, state-run industries were privatised and labour rights weakened, we find a wage curve of -0.08. Based on this finding we conclude that the unemployment-pay elasticity in the post-reform period is similar to the -0.07 to -0.10 wage curve found in other western, capitalist countries. Disaggregating the analysis by group, we find that women, non-university educated workers and public sector workers have suffered more from unemployment. Yet informal sector workers have not experienced pay drops as a result of unemployment, contradicting the hypothesis that the informal sector acts as a buffer during economic downturns.

Keywords: Wage curve; unemployment; inequality; Chile (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (19)

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DOI: 10.1080/0269217042000186651

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