Wage Rigidity and Disinflation in Emerging Countries

This paper examines the consequences of rapid disinflation for downward wage rigidities in two emerging countries, Brazil and Uruguay, relying on high quality matched employer-employee administrative data. Downward nominal wage rigidities are more important in Uruguay, while wage indexation is dominant in Brazil. Two regime changes are observed during the sample period, 1995-2004: (i) in Uruguay wage indexation declines, while workers' resistance to nominal wage cuts becomes more pronounced; and (ii) in Brazil, the introduction of inflation targeting by the Central Bank in 1999 shifts the focal point of wage negotiations from changes in the minimum wage to expected inflation. These regime changes cast doubts on the notion that wage rigidity is structural in the sense of Lucas (1976).

Bibliographic Details

Main Authors:	Sanz-de-Galdeano, Anna, Messina, Julian
Language:	English
Published:	2011-10-01
Subjects:	ADVERSE SELECTION, AGED WORKERS, AGRICULTURE, BARGAINING POWER, BASE YEAR, BENCHMARK, BUSINESS CYCLES, CENTRAL BANK, CPI, DECENTRALIZATION, DEVELOPED COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DISINFLATION, DOWNWARD BIAS, EARNING, ECONOMIC ACTIVITY, EDUCATIONAL ATTAINMENT, EFFICIENCY WAGES, EMPIRICAL ANALYSIS, EMPIRICAL EVIDENCE, EMPLOYEE, EMPLOYMENT, EQUILIBRIUM UNEMPLOYMENT, ESTIMATED PROBABILITY, EXPECTED WAGE, FIRM LEVEL, FISHING, FORECASTS, FORESTRY, FUTURE RESEARCH, GROWTH RATE, HUMAN CAPITAL, INCOME, INCOME COUNTRIES, INDEXATION, INFLATION RATE, INFLATION RATES, JOBS, LABOR CONTRACT, LABOR CONTRACTS, LABOR COST, LABOR ECONOMICS, LABOR FORCE, LABOR MARKET, LABOR MARKET INSTITUTIONS, LABOR MARKETS, LABOR TURNOVER, LAYOFFS, MACROECONOMIC EFFECTS, MACROECONOMIC STABILIZATION, MACROECONOMICS, MENU COSTS, MINIMUM WAGE, MINIMUM WAGES, MONETARY POLICY, NOMINAL WAGES, OCCUPATION, PAYING JOB, POLICY ENVIRONMENT, POLITICAL ECONOMY, PREVIOUS DISCUSSION, PREVIOUS SECTION, PREVIOUS STUDIES, PRICE CHANGES, PRICE SETTING, PRIVATE SECTOR, PRIVATE SECTOR WORKERS, PRODUCTIVITY, REAL GDP, REAL WAGE, SALARY, SEVERANCE PAYMENTS, TAXABLE INCOME, TROUGH, UNEMPLOYMENT, UNION DENSITY, WAGE BARGAINING, WAGE DATA, WAGE DETERMINATION, WAGE DISTRIBUTION, WAGE FLEXIBILITY, WAGE GROWTH, WAGE INCREASE, WAGE INCREASES, WAGE LEVEL, WAGE LEVELS, WAGE NEGOTIATIONS, WAGE RIGIDITIES, WAGE RIGIDITY, WHITE COLLAR WORKER, WHITE COLLAR WORKERS, WORKER, WORKERS, YOUNG WORKERS, YOUNGER WORKERS,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111031104848 https://hdl.handle.net/10986/3629
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