Economic reforms and labour markets: policy issues and lessons from Chile

Authors: Edwards S.; Edwards A.C.

Source: Economic Policy, Volume 15, Number 30, April 2000 , pp. 181-230(50)

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Abstract:

Over the last twenty years sweeping reforms have deeply transformed the labour market in Chile. A visible outcome has been the reduction of Chile’s rate of unemployment from ‘European’ to ‘US’ levels. Even though the political context makes this experiment special, are there economic lessons to be learnt? This paper concentrates on reforms to job security, on the decentralization of the wage bargaining process, and on the reduction in payroll taxes. It concludes that the reduction of payroll taxes (within the context of the social security reform), and the decentralization of bargaining increased labour market flexibility and contributed to the reduction of unemployment. On the other side, the analysis suggests that the reform on job security had no significant effect on the aggregate rate of unemployment.

Language: English

Document Type: Research article

Affiliations: 1: University of California, Los Angeles and National Bureau of Economic Research;California State University, Long Beach

Publication date: 2000-04-01