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Wage Rigidity and Disinflation in Emerging Countries / Messina, JuliEn
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Messina, JuliEn
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Downward wage rigidity.
- Economic Theory & Research.
- Emerging economies.
- Environmental Economics & Policies.
- Finance and Financial Sector Development.
- Income.
- Indexation.
- Labor Markets.
- Labor Policies.
- Matched employer-employee data.
- Social Protections and Labor.
- Local Subjects:
- Downward wage rigidity.
- Economic Theory & Research.
- Emerging economies.
- Environmental Economics & Policies.
- Finance and Financial Sector Development.
- Income.
- Indexation.
- Labor Markets.
- Labor Policies.
- Matched employer-employee data.
- Social Protections and Labor.
- Physical Description:
- 1 online resource (43 pages)
- Place of Publication:
- Washington, D.C., The World Bank, 2011
- System Details:
- data file
- Summary:
- 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).
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