Evolving Wage Cyclicality in Latin America

A vector autoregression model with time-varying coefficients is used to examine the evolution of wage cyclicality in four Latin American economies: Brazil, Chile, Colombia and Mexico, during the period 1980-2010. Wages are highly pro-cyclical in al...

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Bibliographic Details
Main Authors: Messina, Julian, Gambetti, Luca
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank Group, Washington, DC 2014
Subjects:
Online Access:http://documents.worldbank.org/curated/en/2014/07/19881767/evolving-wage-cyclicality-latin-america
http://hdl.handle.net/10986/19346
Description
Summary:A vector autoregression model with time-varying coefficients is used to examine the evolution of wage cyclicality in four Latin American economies: Brazil, Chile, Colombia and Mexico, during the period 1980-2010. Wages are highly pro-cyclical in all countries up to the mid-1990s except in Chile. Wage cyclicality declines thereafter, especially in Brazil and Colombia. This decline in wage cyclicality is in accordance with declining real-wage flexibility in a low-inflation environment. Controlling for compositional effects caused by changes in labor force participation along the business cycle does not alter these results.