Working Paper: NBER ID: w7646
Authors: Sebastian Edwards; Alejandra Cox Edwards
Abstract: This paper deals with the reform to labor market regulation implemented by Chile during the last twenty years. We concentrate on the reform to job security, on the decentralization of the wage bargaining process, and on the reduction in payroll taxes. Our interest is to understand to what extent these reforms helped reduce Chile's rate of unemployment from European' to U.S' levels. We argue that the reduction of payroll taxes (within the context of the social security reform), and the decentralization of bargaining increased labor market flexibility and contributed to the reduction of unemployment. Our analysis suggests that the reform on job security had no significant effect on the aggregate rate of unemployment.
Keywords: No keywords provided
JEL Codes: J5; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reduction of payroll taxes (H29) | Increased labor market flexibility (J48) |
| Increased labor market flexibility (J48) | Reduction of unemployment rates (J68) |
| Decentralization of wage bargaining (J59) | Increased labor market flexibility (J48) |
| Reform of job security legislation (E69) | Aggregate unemployment (J64) |