What Type of Contracts Underlie Aggregate Wage Dynamics?

Author/Editor:

Esteban Jadresic

Publication Date:

May 1, 1997

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper shows that it is possible to estimate the importance of different types of wage contracts at the aggregate level using the same data used to estimate standard Phillips curves. It finds that the behavior of the Chilean private aggregate wage during the 1980s is well described by two-year contracts that are revised every six months according to 100 percent of past inflation. The estimates also show that the unemployment rate was a strong determinant of the contract’s target real wage and that most wage negotiations were carried through during the first half of every year. The results prove robust to a variety of tests and fit the data better than standard Phillips curves.

Series:

Working Paper No. 1997/067

Subject:

English

Publication Date:

May 1, 1997

ISBN/ISSN:

9781451961621/1018-5941

Stock No:

WPIEA0671997

Pages:

29

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