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Labor market flexibility and unemployment in Chile and Uruguay

Author

Listed:
  • Steven Allen
  • Adriana Cassoni
  • Gastón J. Labadie

Abstract

This study compares evidence on wage rigidity in Chile and Uruguay to determine whether differences in labor market flexibility could have had an impact on the very different patterns of unemployment observed in the two countries. Phillips curve estimates show that wages in Uruguay were highly flexible at the aggregate level during the period when the military government was in power, but became more rigid with the return of democracy and collective bargaining. Rising minimum wages and indexation arrangements are plausible explanations of some of the high unemployment in Chile in the late 1970s and early 1980s. At the micro level, we find much more relative wage adjustment across industries in Chile than Uruguay and that labor in Chile is drawn toward sectors with rising relative wages.

Suggested Citation

  • Steven Allen & Adriana Cassoni & Gastón J. Labadie, 1994. "Labor market flexibility and unemployment in Chile and Uruguay," Estudios de Economia, University of Chile, Department of Economics, vol. 21(esp Year ), pages 127-146, November.
    • Handle: RePEc:udc:esteco:v:21:y:1994:i:esp:p:127-146
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    Citations

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    Cited by:

    1. Adriana Cassoni & Steven G. Allen & Gaston J. Labadie, 2004. "Unions and Employment in Uruguay," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 435-496, National Bureau of Economic Research, Inc.
    2. Bussolo, Maurizio & Mizala, Alejandra & Romaguera, Pilar, 2002. "Beyond Heckscher-Ohlin: trade and labour market interactions in a case study for Chile," Journal of Policy Modeling, Elsevier, vol. 24(7-8), pages 639-666, November.
    3. Adriana Cassoni & Steven G. Allen & Gaston J. Labadie, 2000. "The Effect of Unions on Employment: Evidence from an Unnatural Experiment in Uruguay," NBER Working Papers 7501, National Bureau of Economic Research, Inc.
    4. Adriana Cassoni, 2005. "¿Cuánto empleo están generando las exoneraciones fiscales en el Uruguay?," Documentos de Trabajo (working papers) 1605, Department of Economics - dECON.
    5. Adriana Cassoni & Steven G. Allen & Gaston J. Labadie, 2000. "Sindicatos y empleo en Uruguay," Research Department Publications 3093, Inter-American Development Bank, Research Department.
    6. Adriana Cassoni, 1999. "Labour demand in Uruguay before and after re-unionisation," Documentos de Trabajo (working papers) 0199, Department of Economics - dECON.

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