IMF Working Papers

Impacts of Labor Market Institutions and Demographic Factors on Labor Markets in Latin America

By Adriana D. Kugler

July 17, 2019

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Adriana D. Kugler Impacts of Labor Market Institutions and Demographic Factors on Labor Markets in Latin America, (USA: International Monetary Fund, 2019) accessed October 6, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper documents recent labor market performance in the Latin American region. The paper shows that unemployment, informality, and inequality have been falling over the past two decades, though still remain high. By contrast, productivity has remained stubbornly low. The paper, then, turns to the potential impacts of various labor market institutions, including employment protection legislation (EPL), minimum wages (MW), payroll taxes, unemployment insurance (UI) and collective bargaining, as well as the impacts of demographic changes on labor market performance. The paper relies on evidence from carefully conducted studies based on micro-data for countries in the region and for other countries with similar income levels to draw conclusions on the impact of labor market institutions and demographic factors on unemployment, informality, inequality and productivity. The decreases in unemployment and informality can be partly explained by the reduced strictness of EPL and payroll taxes, but also by the increased shares of more educated and older workers. By contrast, the fall in inequality starting in 2002 can be explained by a combination of binding MW throughout most of the region and, to a lesser extent, by the introduction of UI systems in some countries and the role of unions in countries with moderate unionization rates. Falling inequality can also be explained by the fall in the returns to skill associated with increased share of more educated and older workers.

Subject: Employment, Employment protection, Labor, Labor markets, Unemployment, Wages

Keywords: Africa, Central America, Collective bargaining, Employment, Employment protection, Gini coefficient, Inequality, Inequality in Latin America, Labor demographics, Labor market institutions, Labor markets, Latin America, Reservation wage, Skilled worker, Unemployment, Unemployment rate, Wage inequality, Wages, Worker morale, Worker-employer match, WP

Publication Details

  • Pages:

    36

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2019/155

  • Stock No:

    WPIEA2019155

  • ISBN:

    9781484393840

  • ISSN:

    1018-5941