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Estabilidad de la demanda de trabajo y efecto del salario minimo sobre el Empleo: El caso Chileno

Labor demand stability and the minimum wage effect on employment: the Chilean evidence

Jorge Miranda

MPRA Paper from University Library of Munich, Germany

Abstract: The ability of the economy to create jobs through economic growth, it is essential to improve social welfare. It has been argued that the persistence of unemployment in Chile post Asian crisis was mainly due to two factors: First, to a loss of employment generating capacity, expressed in a fall in the employment-PGB elasticity of the economy. Second, a strong negative effect of minimum wage increases in the late nineties. The first hypothesis is not supported empirically, except the work of Martinez et al (2001) who find an unknown break in the demand for labor in 2001. The second scenario presents mixed evidence. In this paper I attempt to answer both questions using an alternative methodology for the estimation of multiple breaks (Bai and Perron, 2003) in the presence of cointegration relationships (Kejriwal, 2008). The results show evidence of a structural break in the labor demand around the year 2001. The break is mainly characterized by an increase in employment-PGB elasticity. Additionally, separating labor demand by sector, find evidence of a stronger negative impact of minimum wages on employment in the tradable sector, in the late nineties. The minimum wage increases 10% above the average wage in the economy destroyed by 3.6% of jobs in the tradable sector of the economy. These results highlight the importance of the economic growth on employment generation as well as the risk of not considering the economic cycle when it legislated minimum wage increases

Keywords: labor demand; structural break; PGB-employment elasticity; minimum wage. (search for similar items in EconPapers)
JEL-codes: C22 J23 (search for similar items in EconPapers)
Date: 2013-04-30
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