The Macroeconomic Impact of Minimum Wages in Chile
Keywords:
minimum wage, macroeconomic model, employment, income distribution, ChileAbstract
This paper studies the macroeconomic effects of a policy addressed to raise minimum wages in Chile. Theoretical approaches and empirical studies, focused on the Chilean and other Latin American cases, are reviewed. To examine the macro effects of minimum wages we specify an annual macroeconomic model for Chile which is estimated through three stage least squares. The model includes a price and wage sector, an open economy expenditure sector with some distributive effects and a labor market specification. Dynamic simulations of an increase in minimum wages and of fiscal, wage and exchange rate packages are then carried out for Chile. The main result obtained is that an increase in minimum wages is expansionary (increases output and aggregate employment) in the short to medium run.Downloads
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Copyright (c) 1988 Andrés Solimano
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